Electricity Price Evolution and the Disruptive Economic and Geopolitical Context on the Spot Market. A Romanian Case Study

Abstract

The current context of the electricity markets is marked by the lingering effects of COVID-19 and the conflict in Ukraine that have a significant influence on the European wholesale electricity markets. Both Day-Ahead Market (DAM) and balancing market have been heavily impacted by fluctuating prices. This trend started in October 2021 when the lockdowns were removed and the high request for commodities led to a higher inflation. Then in 2022, the conflict in Ukraine accentuated this evolution and even higher prices were recorded for electricity, gas, oil and other resources. In this paper, we analyze a set of fundamental variables and provide an electricity price forecast on DAM using a multiple regression model. The exogenous variables considered in this paper are the following: power system data (total consumption, total generation and its breakdown: renewables (RES) and Non-RES), economic data (inflation, interest rate), certificate price for CO2 emissions (EU-ETS), level of Danube River and other resources prices (oil, gas). Interesting insights can be extracted from a data set that consists of merged time series collected from January 2019 until August 2022. The results are measured using Mean Absolute Percentage Error (MAPE).