Abstract
This paper examines the potential implications of national policies that lead to a sudden increase of wind power in the electricity mix for interconnected European electricity markets. More specifically, it examines market integration before and after the closures of eight nuclear power plants that occurred within a period of a few months in Germany during 2011. The short- and- long run interrelationships of daily electricity spot prices, from November 2009 to October 2012, in: APX-ENDEX, BELPEX, EPEX-DE, EPEX-FR, NORDPOOL, OMEL and SWISSIX; and wind power in the German system are analysed. Two MGARCH (Multivariate Generalized Autoregressive Conditional Heteroscedasticity) models with dynamic correlations are used to assess spot market behaviour in the short run, and a fractional cointegration analysis is conducted to investigate changes in the long-run behaviour of electricity spot prices. Results show: positive time-varying correlations between spot prices in markets with substantial shared interconnector capacity; a negative association between wind power penetration in Germany and electricity spot prices in the German and neighbouring markets; and, for most markets, a decreasing speed in mean reversion.
Highlights
Common goals in European energy policy are security of supply, affordability and climate change
The present study investigates short- and- long run associations of electricity day-ahead prices and wind power penetration in German market, which is the largest and most liquid in Europe, with other European markets, by comparing the periods of one year before and after the closures of eight nuclear plants that followed the 13th Gesetz zur Änderung des Atomgesetz (Nuclear Phase-Out Act)
Energiewende, has led to considerable growth in intermittent renewable energy sources (RES-E), and wind power capacity increased from 183MWh in 1992 to 31.308MWh in 2012, so that Germany had a third of the installed EU wind power capacity in 2012 (EWEA, 2012)
Summary
Common goals in European energy policy are security of supply, affordability and climate change. National policies that affect wholesale prices in one electricity market can impact the process of integration. The present study investigates short- and- long run associations of electricity day-ahead prices and wind power penetration in German market, which is the largest and most liquid in Europe, with other European markets, by comparing the periods of one year before and after the closures of eight nuclear plants that followed the 13th Gesetz zur Änderung des Atomgesetz (Nuclear Phase-Out Act). With the closure of eight nuclear plants in a short period, the German electricity mix changed significantly; the share of other technologies increased, most noticeably wind power, as will be highlighted
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