Abstract
European wholesale power prices have decreased substantially in recent years, bringing several large utilities to the brink of severe financial problems. In this study, we identify and determine the impact of several fundamental drivers on the electricity wholesale day-ahead price using long panel data. We analyze monthly data of ten Continental European power markets between 2009 and 2015. Our results suggest quantity variables related to the countries’ generation mixes as well as fossil fuel prices to have the most significant impact on local day-ahead power prices. From a managerial point of view, our results support the assessment of expansion strategies as well as the profitability and future perspective of different power generating technologies. Regulators may use the outcome of this study to evaluate policies, including the impact of renewable promotion and carbon prices or the necessity of capacity remuneration mechanisms, to ensure security of supply.
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