Template-Type: ReDIF-Article 1.0
Author-Name:  Eike Blume-Werry, Thomas Faber, Lion Hirth, Claus Huber, and Martin Everts
Title:  Eyes on the Price: Which Power Generation Technologies Set the Market Price? 
Classification-JEL: F0
Volume:  Volume 10
Issue:  Number 1
Year:  2021
Abstract:  Upon discussion of price setting on electricity wholesale markets, many refer to the so-called merit order model. Conventional belief holds that during most hours of the year, coal- or natural gas-fired power plants set the price on European markets. In this context, this paper analyses price setting on European power markets. We use a fundamental electricity market model of interconnected bidding zones to determine hourly price-setting technologies for 2020. We find a price-setting pattern that is more complex and nuanced than the conventional belief suggests: across all researched countries, coal- and natural gas-fired power plants set the price for only 40 per cent of all hours. On some markets, the price setting is characterised by a high level of interconnectivity-as illustrated by the example of the Netherlands. During some 75 per cent of hours, foreign power plants set the price on the Dutch market.
Handle: RePEc:aen:eeepjl:eeep10-1-Blume-Werry
File-URL: http://www.iaee.org/en/publications/eeeparticle.aspx?id=363
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