It is windy in Denmark: Does market integration suffer?

Abstract

Some benefits of spot electricity markets integration include the optimization of renewable power, increasing transmission grid security and the decreasing need for internal generation reserves. The high penetration of wind power is known to have a clear influence on price convergence between electricity markets joined by market splitting. However, in multiple interconnected markets, cross-border flows can also play a role in the market splitting behaviour. Denmark, with a high penetration of wind power, is clearly the ideal case study. This paper aims to assess the influence of high penetration of wind power on the market splitting behaviour between West and East Denmark, taking into account cross-border electricity flows. This is modelled through logit and non-parametric models, estimating the probability of market splitting occurrence between both Danish bidding areas. Market splitting probability is found to be sensitive to wind power, nevertheless with distinct behaviour according to interconnection congestion configuration. The highest availability of wind power in West Denmark, which can reach a generation share of 1.5 times the demand, requires strong cross-border interconnections to allow the export of the excess generation. Policies governing a joint assessment of the requirements for additional interconnection and wind power expansion plans, should be developed.

Good volatility, bad volatility: What drives the asymmetric connectedness of Australian electricity markets?

“…The above observations together with the use of a national green tradable certificate scheme imply a change in regional demand and prices, as well as regional price volatility transmission within other states within the NEM. Figueiredo, da Silva, and Cerqueira (2016) use logit and non-parametric models to estimate the probability of market splitting occurrence between two Danish bidding areas; they conclude that market splitting probability between West and East Denmark increases (i.e., decreases in the degree of price convergence or market integration) when there is an increase of wind power generation share in both West and East Denmark. We pair the above insights and evidence with the time-varying total spillover index as presented in Figure 1.…”

Electricity price forecasting on electricity spot market: a case study based on the Brazilian Difference Settlement Price

“…The main articles that addressed nonparametric models applied to energy focused on: (i) assessing the influence of high penetration of wind power on the market-splitting behavior between West and East Denmark, using logit and non-parametric models [49]; and, (ii) expressing the probability response for market-splitting of day-ahead spot electricity prices as a function of the explanatory variables representing the main technologies in the generation mix, including wind, hydro, thermal and nuclear power, together with the available transfer capacity and electricity demand [50].…”