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An Empirical Analysis of Liquidity and its Determinants in The German Intraday Market for Electricity

Author

Listed:
  • Simon Hagemann
  • Christoph Weber

    (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)

Abstract

This paper presents a theoretical and empirical analysis of liquidity in the German intraday market for electricity. Two models that aim at explaining intraday liquidity are developed. The first model considers the fundamental merit-order and intraday adjustment needs as the drivers of liquidity in a perfectly competitive market. The second model relaxes the assumption of perfect competition in the intraday market and assumes that the trading behavior of profit maximizing market participants influences the liquidity provision. The relevance of commonly used liquidity indicators like the bid ask-spread, resiliency, market depth, price variance, delay and search costs as well as trading volume and the number of trades are analyzed with respect to both models of liquidity. The empirical findings indicate that liquidity in the German intraday market can be explained by the trading model while the purely fundamental model is rejected.

Suggested Citation

  • Simon Hagemann & Christoph Weber, 2013. "An Empirical Analysis of Liquidity and its Determinants in The German Intraday Market for Electricity," EWL Working Papers 1317, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Oct 2013.
    • Handle: RePEc:dui:wpaper:1317
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    More about this item

    Keywords

    Intraday market; electricity; liquidity; fundamental model; trading model;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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