Change of persistence in European electricity spot prices

TL;DR

This paper investigates the changing persistence and stochastic memory of European electricity spot prices across different markets and time scales, revealing contrasting correlation behaviors in intraday and day-ahead markets.

Contribution

It introduces a novel analysis using Kramers--Moyal equations to compare with DFA, highlighting the different temporal correlations in various electricity markets.

Findings

Intraday 15-minute markets show strong negative correlations at short time scales.

Day-ahead hourly markets exhibit positive correlations at short time scales.

All markets tend to be anti-correlated over periods up to two days.

Abstract

The European Power Exchange has introduced day-ahead auctions and continuous trading spot markets to facilitate the insertion of renewable electricity. These markets are designed to balance excess or lack of power in short time periods, which leads to a large stochastic variability of the electricity prices. Furthermore, the different markets show different stochastic memory in their electricity price time series, which seem to be the cause for the large volatility. In particular, we show the antithetical temporal correlation in the intraday 15 minutes spot markets in comparison to the day-ahead hourly market. We contrast the results from Detrended Fluctuation Analysis (DFA) to a new method based on the Kramers--Moyal equation in scale. For very short term ($<12$ hours), all price time series show positive temporal correlations (Hurst exponent $H>0.5$) except for the intraday 15 minute market, which shows strong negative correlations ($H<0.5$). For longer term periods covering up to two days, all price time series are anti-correlated ($H<0.5$).