The impacts of variable renewable production and market coupling on the convergence of French and German electricity prices

Jan Horst Keppler, Yannick Le Pen () and Sébastien Phan
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Yannick Le Pen: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: As speculative flows into commodity futures are expected to link commodity prices more strongly to equity indices, we investigate whether this process also creates increased correlations amongst the commodities themselves. Considering U.S. oil and gas futures, we investigate whether common factors, derived from a large international data set of real and nominal macroeconomic variables by means of the large approximate factor models methodology, are able to explain both returns and whether, beyond these fundamental common factors, the residuals remain correlated. We further investigate a possible explanation for this residual correlation by using some proxies for trading intensity derived from CFTC publicly available data, showing most notably that the proxy for speculation in the oil market increases the oil-gas correlation. We thus identify the central role of financial activities in shaping the link between oil and gas returns.

Keywords: electricity price convergence; renewable energies; intermittency; market coupling; France; Germany (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (15)

Published in Energy Journal, 2016, 37 (3), ⟨10.5547/01956574.37.3.jkep⟩

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Journal Article: The Impacts of Variable Renewable Production and Market Coupling on the Convergence of French and German Electricity Prices (2016)
Journal Article: The Impacts of Variable Renewable Production and Market Coupling on the Convergence of French and German Electricity Prices (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01609447

DOI: 10.5547/01956574.37.3.jkep

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