Cross-Border Effects on Swiss Electricity Prices in the Light of the Energy Transition

Karl Frauendorfer, Florentina Paraschiv and Michael Schürle
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Karl Frauendorfer: Institute for Operations Research and Computational Finance, University of St. Gallen, Bodanstrasse 6, 9000 St. Gallen, Switzerland
Florentina Paraschiv: Institute for Operations Research and Computational Finance, University of St. Gallen, Bodanstrasse 6, 9000 St. Gallen, Switzerland
Michael Schürle: Institute for Operations Research and Computational Finance, University of St. Gallen, Bodanstrasse 6, 9000 St. Gallen, Switzerland
Authors registered in the RePEc Author Service: Michael Schuerle

Energies, 2018, vol. 11, issue 9, 1-30

Abstract: Given the perspective of the Swiss energy policy to support investments in renewable energy sources, it becomes highly relevant at this point to understand cross-border effects of imported electricity on the Swiss electricity prices. We found that German (Phelix) and Swiss (Swissix) electricity prices are cointegrated, given that the two markets are interconnected. We examined the cross-border effects of the German market fundamentals on Swissix, taking into account seasonality aspects. In the context of a dynamic fundamental model, we found that there is a continuous adaption process of electricity prices to market fundamentals and that this effect depends on the season of the year and the time of the day. Model results reveal the substitution effect between traditional fuels and renewable energies due to their alternative use in production and the shift in the merit order curve. Results are of great relevance to Swiss policy makers: Switzerland imports lower electricity prices due to the energy transition in Germany. In particular, because of the high infeed of PV (photovoltaic) during peak hours, the spread between Swissix peak and off-peak prices narrowed significantly over time. Incentives for investments in renewable energies in Switzerland as well as subsidies for hydropower should be considered in the light of these insights.

Keywords: Swiss electricity prices; renewable energy; fundamental model; cross-border effects (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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