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The effects of wind power on electricity markets: A case study of the Swedish intraday market

Hu, Xiao and Jaraitė, Jūratė and Kažukauskas, Andrius (2021). The effects of wind power on electricity markets: A case study of the Swedish intraday market. Energy Economics. 96 , 105159
[Research article]

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Abstract

We investigate the process of electricity price formation in the Swedish intraday market, given a large share of wind power in the Swedish electricity system. According to Karanfil and Li's (2017) approach, if the intraday market is efficient, with large shares of intermittent electricity in the entire electricity system, intraday prices should send signals based on scarcity pricing for balancing power. Based on this theory, we analyze Swedish electricity market data for the period 2015?2018 and find that the Swedish intraday market, despite its small trading volumes, is functioning properly. In particular, our results show that intraday price premia mostly respond to wind power forecast errors and other imbalances resulting from either supply or demand sides of the electricity market, as they should if the intraday market is efficient. The results of wind power forecast errors hold for central and southern Sweden, but not for northern Sweden where the share of wind power production is still very small. However, we find no effect of unplanned nuclear power plant outages on intraday price premia.We investigate the process of electricity price formation in the Swedish intraday market, given a large share of wind power in the Swedish electricity system. According to Karanfil and Li's (2017) approach, if the intraday market is efficient, with large shares of intermittent electricity in the entire electricity system, intraday prices should send signals based on scarcity pricing for balancing power. Based on this theory, we analyze Swedish electricity market data for the period 2015?2018 and find that the Swedish intraday market, despite its small trading volumes, is functioning properly. In particular, our results show that intraday price premia mostly respond to wind power forecast errors and other imbalances resulting from either supply or demand sides of the electricity market, as they should if the intraday market is efficient. The results of wind power forecast errors hold for central and southern Sweden, but not for northern Sweden where the share of wind power production is still very small. However, we find no effect of unplanned nuclear power plant outages on intraday price premia. ? 2021 Elsevier B.V. All rights reserved.

Authors/Creators:Hu, Xiao and Jaraitė, Jūratė and Kažukauskas, Andrius
Title:The effects of wind power on electricity markets: A case study of the Swedish intraday market
Series Name/Journal:Energy Economics
Year of publishing :2021
Volume:96
Article number:105159
Number of Pages:16
ISSN:0140-9883
Language:English
Publication Type:Research article
Article category:Scientific peer reviewed
Version:Published version
Copyright:Creative Commons: Attribution-Noncommercial-No Derivative Works 4.0
Full Text Status:Public
Subjects:(A) Swedish standard research categories 2011 > 5 Social Sciences > 502 Economics and Business > Economics
Keywords:day-ahead market, electricity, forecast errors, intraday market, intraday price premia, nuclear power outages, Sweden, wind power
URN:NBN:urn:nbn:se:slu:epsilon-p-111261
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-p-111261
Additional ID:
Type of IDID
DOI10.1016/j.eneco.2021.105159
Web of Science (WoS)000634560900010
ID Code:27313
Faculty:S - Faculty of Forest Sciences
Department:(S) > Dept. of Forest Economics
Deposited By: SLUpub Connector
Deposited On:14 Mar 2022 16:25
Metadata Last Modified:14 Mar 2022 16:31

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