Short-Term Dynamics of Day-Ahead and Intraday Electricity Prices

Purpose: Since the liberalization of electricity markets in the European Union, prices are subject to market dynamics. Hence, understanding the short-term drivers of electricity prices is of major interest to electricity companies and policy-makers. Accordingly, this paper studies movements of prices in the combined German and Austrian electricity market. Approach: We estimate an autoregressive model with exogenous variables (ARX) in a two-step procedure. We first de-seasonalize both time series, which inherently feature seasonality, and, in a second step, measure the influence of all model variables on the two dependent variables, i.e. the day-ahead and intraday EPEX prices. Findings: Our results reveal that the short-term market is largely driven by seasonality, consumer demand and short-term feed-ins from renewable energy sources. As a contribution to the existing body of literature, this paper specifically compares the price movements in day-ahead and intraday markets. In intraday markets, the influences of renewable energies are much stronger than in day-ahead markets, i.e. by 24.12% for wind and 116.82% for solar infeeds. Originality: Knowledge on the price setting mechanism in the intraday market is particularly scarce. This paper contributes to existing research on this topic by deriving drivers in the intraday market and then contrasting them to the day-ahead market. A more thorough understanding is especially crucial all stakeholders, who can use this knowledge to optimize their bidding strategies. Furthermore, our findings suggest policy implications for a more stable and efficient electricity market