Resource title

A Markov switching model of the merit order to compare British and German price formation

Resource image

image for OpenScout resource :: A Markov switching model of the merit order to compare British and German price formation

Resource description

The objective of this paper is to develop a model to determine the price formation of wholesale electricity markets. For that purpose, we model wholesale electricity prices depending on the prices of fuels (coal and natural gas) and of CO2 emission allowances using a Markov Switching Regression. We apply the model to wholesale electricity prices in the UK and in Germany. While British electricity prices are quite well explained by short-run cost factors, we find a decoupling between electricity prices and fuel costs in Germany. This may be evidence that the German electricity generation sector does not work competitively.

Resource author

Georg Zachmann

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/27238

Resource license

Adapt according to the presented license agreement and reference the original author.