IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

An Empirical Analysis of the Bid-ask Spread in the Continuous Intraday Trading of the German Power Market

Liquidity is decisive for a well-functioning market. As most of the literature on the subject is based on financial markets, the extrapolation of its insights to the power market is fragile. This paper shows the specificities of liquidity of the German power market. Using the bid-ask spread as a proxy, thanks to the detailed order book for the hourly contracts, I first describe the evolution of the liquidity over the trading session. The bid-ask spread has a "L-shaped" pattern over it. Second, I identify the four main drivers of the bid-ask spread: the volatility, the adjustments' need (forecast errors), the activity and the concentration of the market. I find that an increase of the volatility or the market concentration increases the bid-ask spread while an increase of the adjustments' need or the market activity decreases it.

Download Executive Summary Purchase ( $25 )

Keywords: Bid-ask spread, Market depths, Continuous market, Power market

DOI: 10.5547/01956574.43.3.cbal

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 43, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2024 International Association for Energy Economics | Privacy Policy | Return Policy