In the realm of energy journalism, understanding the intricacies of electricity markets is crucial. A team of researchers from the University of Flensburg, including Jorge Sánchez Canales, Alice Lixuan Xu, Chiara Fusar Bassini, Lynn H. Kaack, and Lion Hirth, have delved into this complex topic with their study titled “An empirical estimate of the electricity supply curve from market outcomes.”
The researchers aimed to provide a data-driven methodology to estimate the supply curve of electricity markets empirically, using observed prices and quantities without relying on additional modeling assumptions. This approach is particularly relevant for tasks such as price forecasting, policy analyses, and market power assessment.
The study focuses on the German electricity market between 2019 and 2024, a period marked by significant fluctuations in fuel prices due to the European energy crisis. To identify periods of stable supply curves amidst these fluctuations, the researchers implemented two alternative clustering methods. One method was based on the fundamental drivers of electricity supply, while the other was directly based on observed market outcomes.
The findings revealed that both approaches identified almost identical regime shifts, supporting the idea of stable supply regimes stemming from stable drivers. The researchers noted that supply conditions were often stable for extended periods but evolved rapidly during the energy crisis, triggering a rapid succession of regimes. Fuel prices were found to be the dominant drivers of regime shifts, while conventional plant availability and the nuclear phase-out played a comparatively minor role.
The practical applications of this research for the energy sector are significant. The empirical supply curves produced by this approach can be used for causal inference and counterfactual analysis of market outcomes. This can help energy sector practitioners make more informed decisions regarding price forecasting, policy analyses, and market power assessment.
The research was published in the journal Nature Energy, a reputable source for energy-related studies. The study’s findings contribute valuable insights to the understanding of electricity markets and provide a robust methodology for future research in this area.
This article is based on research available at arXiv.