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Understanding electricity price evolution – day-ahead market competitiveness in Romania

    Adela Bâra   Affiliation
    ; Simona-Vasilica Oprea   Affiliation
    ; Irina Alexandra Georgescu Affiliation

Abstract

The unexpected pandemic eruption in March 2020, the European efforts to diminish the gas house emissions, prolonged drought, higher inflation and the war in Ukraine clearly have had a strong impact on the electricity price. In this paper, we analyze the electricity prices on the Romanian Day-Ahead Market (DAM) along with other variables (inflation, consumption and traded volume of gas on DAM) over the last three and a half years in an attempt to understand its evolution and future trend in the economic and geopolitical context. Autoregressive Distributed Lag models are proposed to analyze the causality among variables on short- and long-term perspective, whereas Quantile Regression (QR) is proposed to enhance the results of the Ordinary Least Squares (OLS) regression. Furthermore, using market concentration metrics – Herfindahl-Hirschman Index (HHI), C1 and C3 ratio, we analyze the competitiveness on the Romanian DAM and correlate it with the electricity price evolution. The concentration indicators on this market reflect the degree of competition manifested between sellers and buyers respectively, their dynamics being able to influence the price level. The higher concentration on the sellers’ side (HHI = 1500) indicates a potential speculative behavior on this market that led to higher prices on DAM.

Keyword : market concentration metrics, day-ahead market, electricity price, causality, autoregressive distributed lag, quantile regression

How to Cite
Bâra, A., Oprea, S.-V., & Georgescu, I. A. (2023). Understanding electricity price evolution – day-ahead market competitiveness in Romania. Journal of Business Economics and Management, 24(2), 221–244. https://doi.org/10.3846/jbem.2023.19050
Published in Issue
May 10, 2023
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This work is licensed under a Creative Commons Attribution 4.0 International License.

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