Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

Abstract: This paper investigates the impact of intermittent renewable generation on the distribution of electricity prices and their variability in Denmark and Germany. We exploit hourly data from 2015 to 2020 and employ a novel panel quantile approach - the Quantiles via moments (MMQR) method. The combination of hourly-specific effects and the quantile approach allow us to estimate the renewable sources effect on various price quantiles while controlling for market dynamics. The results suggest that the merit-order effect occurs in both countries, with wind and solar generation having diverse effects on the electricity price distribution. Thus, policy makers should consider this diversifying effect to develop efficient renewable support schemes. We also explore non-linearities by including different demand levels in our model and investigate price variability. The outcomes indicate that wind generation increases (decreases) the occurrence of price fluctuations for low demand (high demand) in both countries. Meanwhile, in Germany, solar power stabilizes price fluctuations for high demand levels, stronger than wind. Market risk information could be useful for organizations in recognizing beneficial investment opportunities or hedging strategies. We finally aggregate the hourly observations into daily and compare the estimation outcomes. Hourly-related features seem to affect the merit-order effect and its robustness, and a panel approach shall be considered when investigating electricity markets.

Keywords: Electricity prices; panel quantile regression; renewable sources; merit-order effect; price variability

JEL-codes: Q20; Q40

Language: English

30 pages, February 2, 2022

Full text files

2976640  Full text

Download statistics

• Norwegian School of Economics, Department of Business and Management Science
• Ordering Working Papers
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Stein Fossen ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-03-14 04:36:16.