Work detail

The impact of renewable resources on price volatility in the European power markets

Author: Bc. Katarína Líšková
Year: 2017 - summer
Leaders: prof. PhDr. Ladislav Krištoufek Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 110
Awards and prizes: B.A. with distinction from the Director of IES FSV UK for an extraordinarily good bachelors diploma thesis.
Link: https://is.cuni.cz/webapps/zzp/detail/185512/
Abstract: Integration of renewable energy sources impacts electricity spot price and its variation.
Remaining open question is, in which direction. Volatility fluctuations threaten security
of electricity supply, influence trading strategies and create uncertainty in optimal
installed capacity planning. In this thesis, drivers of price volatility in Czech and German
day-ahead power market are analysed with an emphasis on penetration of renewable
energy sources. To the best of our knowledge, this is the first study focused on this
issue in Czech electricity market. We apply recently developed approach of quadratic
variation theory with an adjustment for electricity prices. Realised volatility is divided
into its continuous and jump component. The continuous part is modelled by three heterogeneous
autoregressive models, differing in complexity and inclusion of market-specific
fundamental variables. Amendments to each model for the particular market are proposed
and the models are evaluated both in-sample and out-of-sample. Addition of exogenous
variables − commodity prices, weather conditions and seasonal variables − to simpler
heterogeneous autoregressive model is found to improve volatility forecast accuracy. The
results suggest higher continuous volatility due to increased penetration of power from
wind generators in German market. The effect of photovoltaic penetration on continuous
volatility in both studied markets is not significantly different from zero.

Partners

Deloitte
Česká Spořitelna

Sponsors

CRIF
McKinsey
Patria Finance
EY