Fundamental Responsiveness in European Electricity Prices

Michail I. Seitaridis, Nikolaos S. Thomaidis and Pandelis N. Biskas
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Michail I. Seitaridis: RiskGroupAUTH, & Applied Economics Lab., School of Economics, Aristotle University of Thessaloniki, 54124 Thessaloniki, Greece
Nikolaos S. Thomaidis: RiskGroupAUTH, & Applied Economics Lab., School of Economics, Aristotle University of Thessaloniki, 54124 Thessaloniki, Greece
Pandelis N. Biskas: Power Systems Lab., School of Electrical & Computer Engineering, Aristotle University of Thessaloniki, 54124 Thessaloniki, Greece

Energies, 2021, vol. 14, issue 22, 1-14

Abstract: We estimate fundamental pricing relationships in selected European day-ahead electricity markets. Using a fractionally integrated panel data model with unobserved common effects, we quantify the responsiveness of hourly electricity prices to two fundamental leading indicators of day-ahead markets: the predicted load and renewable generation. The application of fractional cointegration analysis techniques gives further insight into the pricing mechanism of power delivery contracts, enabling us to measure the persistence of fundamental shocks.

Keywords: day-ahead electricity markets; fundamental valuation; panel data econometrics; common latent effects; long memory (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: 2021
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