What caused the drop of European electricity prices? A factor decomposition analysis
- European wholesale electricity prices have dropped by early two thirds since their all-time high around 2008. Different factors have been blamed, or praised, for having caused the price slump: the expansion of renewable energy; the near-collapse of the European emissions trading scheme; over-optimistic power plant investments; a decline in final electricity consumption; and cheap coal and natural gas. This ex-post study of European electricity markets from 2008 to 2015 uses a fundamental power market model to quantify their individual contributions on day-ahead prices. The two countries we study in detail, Germany and Sweden,differ significantly: fuel and CO2 prices were important price drivers in Germany, but in Sweden it was electricity demand. This difference is explained by the nature of the hydro-dominate Nordic electricity system. In both countries, however, the single largest factor depressing prices was the expansion of renewable energy. At the same time, Germany’s nuclear phase-out had an upward effect on prices. If one defines the Energiewende as the combination of these two policies, its net effect on power prices was negligible.
Document Type: | Article |
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Language: | English |
Author(s): | Lion HirthORCiD |
Parent Title (English): | The Energy Journal |
ISSN: | 0195-6574 |
ISSN: | 1944-9089 |
Publication year: | 2018 |
Embargo Date: | 2020/01/01 |
Publishing Institution: | Hertie School |
First Page: | 143 |
Last Page: | 157 |
Related URL: | http://www.iaee.org/en/publications/download-view.aspx?id=3031 |
DOI: | https://doi.org/10.5547/01956574.39.1.lhir |
Release Date: | 2017/06/28 |
Tag: | electricity price; ex-post analysis; utility crisis |
Volume: | 39 |
Issue: | 1 |
Notes: | This is a post-peer-review, pre-copyedit version of an article published in The Energy Journal. The final authenticated version is available online at: DOI 10.5547/01956574.39.1.lhir |
Hertie School Research: | Centre for Sustainability |
Licence of document (German): | Metadaten (öffentlich), post-print |