| dc.description.abstract | As interconnectivity and market integration is increasing in importance globally, the importance of understanding the underlying implications has increased accordingly. The ever-increasing share of renewables in the energy mix has profound effects on electricity systems’ reliability, where interconnectivity is seen as a possible solution. This thesis aims to explore how these market connections affect electricity price dynamics. More specifically, we explore how electricity flow and interconnectivity impact electricity price volatility in the NO2 bidding-zone in Norway. Research on the subject is limited, we thus aim to bridge a gap and provide insights in an unexplored market on a timely and relevant topic.
We base our analysis on electricity price data from 2013 to 2022 and find a significant negative relationship between electricity flow and electricity price volatility in NO2 BZ. Furthermore, the results suggest that there is a positive relationship between a higher level of integration and electricity spot price volatility. These findings have implications for Norwegian electricity producers and consumers, as producers have increased incentive in seizing arbitrage opportunities as a result of price differentiation in connected markets, resulting in a higher electricity price for consumers. These effects will also carry on to neighboring markets, creating implications for consumers and producers here alike. | |