Abstract
Intraday electricity trading on the continuous intraday market of EPEX SPOT is particularly well suited for the rebalancing of energy production. We analyzed the volatility and dispersion of individual hourly contracts, taking into account the particularities of the market, due to which the standard volatility measure from financial time series cannot be applied. We used and analyzed five measures for price fluctuations, which turned out to be similarly well suited for electricity contracts, with small differences. We then identified fundamental drivers of price fluctuations: the relative share of wind in the overall mix increased dispersion. In addition, price dispersion was positively correlated with the traded volume as well as the absolute difference between the day-ahead auction price and the volume-weighted intraday price. We furthermore analyzed the timely structure of price fluctuations to identify forecast indicators for a contract’s peak trading hour before maturity, finding that trading-related variables are more important to forecast price fluctuations than fundamental factors. With lagged realizations and additional external drivers, forecast regressions reached an adjusted R2 of 0.479 for volatility and around 0.3 for the dispersion measures.
Highlights
Short-term trading of electricity in Germany mainly takes place at the EPEX SPOT exchange
There are two types of markets to fulfill different needs: the dayahead auction offers the opportunity to adjust the production schedule for the following day with regard to hourly contracts and takes place at 12 a.m. each day. This does not allow market participants to react quickly to changes in forecasts for renewable energies, wind and solar energy. This possibility is offered by the continuous intraday market, which starts at 3 p.m. each day for hourly contracts for the following day
We propose three different categories of volatility and dispersion measures, which cover a variety of different statistical approaches to measure and analyze price fluctuations
Summary
Short-term trading of electricity in Germany mainly takes place at the EPEX SPOT exchange. While most contributions in the literature focus on the day-ahead market, we are the first to provide a comprehensive overview of price fluctuations of individual hourly contracts during their (short-dated) lifetime. In this regard, the concept of “volatility” is used in different ways in the literature. In the context of electricity trading, these are fluctuations of intraday prices for an individual contract, with a trading window from 3 p.m. until the traded hour on the day The extent of this intraday price fluctuations is of particular importance for both suppliers and demanders of energy, who have to react to short-term deviations from their anticipated buy or sell volume.
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