Abstract
The functional relationship linking spot and forward power prices has been long debated. In this chapter, we rely on a modified interpretation of the storage theory and draw on an approximation of residual generation capacity in the German power system to model the difference between future and spot prices (price basis) registered at the European Energy Exchange (EEX). We accommodate various econometric specifications to three years of daily data time series. Statistical significance is achieved in all cases. Best results are obtained with an exponential GARCH estimation. Restated residual capacity is able to accurately drive the observed basis. This provides some evidence of the increasing rationality of power markets and their dependence on production and distribution constraints.KeywordsElectricity MarketGARCH ModelSpot PriceSpot PrexResidual LoadThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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