Spot prices of electricity in Germany and other European countries

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Spot prices are key indicators of scarcity and competition in liberalized wholesale electricity markets, which are influenced by unique factors. Variations in load, the need for instantaneous balancing between generation and demand, and network transportation effects create complex interactions among regionally dispersed flexible hydro and relatively inflexible thermal generation technologies. This analysis reveals how the structure and level of German spot prices can be explained by these interactions. A static merit order approach is inadequate; instead, a dynamic model that accounts for the inflexibility of generation capacity is necessary to obtain realistic marginal cost estimators during peak and off-peak periods. The first part of the book presents theoretical models illustrating how specific factors and the distribution of ownership and control over capacity impact prices in large, heterogeneous electricity generation systems. The second part focuses on the spot price simulation model EUDIS, demonstrating how these factors are integrated into an empirical model of the European electricity generation system. Simulation results are provided to showcase the model's predictive and analytical capabilities for the current German wholesale market. The book thoroughly examines the interplay of generation, transport, supply, and demand in determining spot prices in the electricity market.