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A structural analysis of the merit-order effect in the Spanish day-ahead power market

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorEscribano, Álvaro
dc.contributor.authorOrtega, Álvaro
dc.contributor.editorUniversidad Carlos III de Madrid. Departamento de Economíaes
dc.contributor.funderMinisterio de Economía y Competitividad (España)es
dc.contributor.funderComunidad de Madrides
dc.contributor.funderAgencia Estatal de Investigación (España)es
dc.date.accessioned2021-09-21T17:53:46Z
dc.date.available2021-09-21T17:53:46Z
dc.date.issued2021-09-21
dc.description.abstractRenewable generation has increased exceptionally its weight in power markets, and its relevance is due to increase with the introduction of recent climate policies in Europe. The merit-order effect ranks first on the direct impacts of renewables on electricity markets. However, in order to analyse its impact, it is important to control for the different forces driving electricity prices. As a result, the analysis through a structural model of demand and supply of electricity is interesting to capture price drivers and therefore measure correctly the merit-order effect. The objective of this paper is tointroduce this framework on the Spanish day-ahead market, using weekly data for the period 2013-2019. The empirical analysis is carried out using structural vector autoregressive models (SVAR) and autoregressive distributed lag models (ARDL) to each equation, with the addition of GARCH models to control for the possible autoregressive volatility behaviour of the residuals. In line with previous literature, we obtain that demand of electricity is elastic to economic growth, price-inelastic and shows a significant level of substitution between electricity and natural gas. The supply function is also price-inelastic, after controlling for capacity factors, inputs prices and external balance, that are shown to be significant. The estimated values of the merit-order effect is aligned with previous literature. We obtain that a 10% increase in the average quantity generated by the special regime technologies (wind, solar and CHP) is associated with a 5 % reduction in electricity prices, around 2.35Euros/MWh of the average price for the analysed period.en
dc.description.sponsorshipThe first author acknowledges the funding received by the Ministry of Economics of Spain (ECO2016-00105-001, MDM 2014-0431), the Community of Madrid (MadEco-CM S2015/HUM-3444 and the Agencia Estatal de Investigación (2019/00419/001).en
dc.identifier.issn2340-5031es
dc.identifier.urihttps://hdl.handle.net/10016/33298
dc.identifier.uxxiDT/0000001925es
dc.language.isoenges
dc.relation.ispartofseriesWorking paper. Economicsen
dc.relation.ispartofseries21-08
dc.relation.projectIDGobierno de España. RTI2018-101371-B-I00es
dc.relation.projectIDGobierno de España. ECO2016-00105-001es
dc.relation.projectIDComunidad de Madrid. MDM 2014-0431es
dc.relation.projectIDComunidad de Madrid. MadEco-CM S2015/HUM-3444es
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España*
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/*
dc.subject.jelL94
dc.subject.jelL51
dc.subject.jelL52
dc.subject.jelL13
dc.subject.otherDemand of Electricityen
dc.subject.otherSupply of Electricityen
dc.subject.otherMerit-Orderen
dc.subject.otherRenewable Generationen
dc.subject.otherCapacity Factoren
dc.subject.otherDay-Ahead Power Marketen
dc.titleA structural analysis of the merit-order effect in the Spanish day-ahead power marketen
dc.typeworking paper*
dspace.entity.typePublication
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