# Structural price model for electricity coupled markets

## TL;DR

This paper introduces a structural model for coupled electricity markets that accurately captures spot and forward prices, considering fuel prices, consumption, and generation capacity, with explicit formulas for derivatives.

## Contribution

The paper presents a novel structural modeling approach for coupled electricity markets, enabling explicit calculation of prices and derivatives considering interconnection and fuel dependencies.

## Key findings

- Model captures key price characteristics
- Explicit formulas for forward prices and derivatives
- Illustrative results on price behavior and transmission rights

## Abstract

We propose a new structural model that can compute the electricity spot and forward prices in two coupled markets with limited interconnection and multiple fuels. We choose a structural approach in order to represent some key characteristics of electricity spot prices such as their link to fuel prices, consumption level and production fleet. With this model, explicit formulas are also available for forward prices and other derivatives. We give some illustrative results of the behaviour of spot and forward prices, and of the values of transmission rights.