How much of the Energy Prices in Norway are driven by the European Energy Market

Abstract

In this thesis the historical electricity prices in the Norwegian and German markets are statistically analyzed based on spot and day-ahead market electricity price data provided by Nord Pool. The purpose is to see how the Norwegian market is dictated by the German market, in light of the significant electricity price increases predicted in 2021 and through 2022 as a result of the energy crisis in Europe by studying the price fluctuations. The aim was to apply Vector Autoregression (VAR), providing Granger Causality results to the research question, which concluded no significant evidence of Granger causation in pricing between the German and Norwegian markets. However, there is indication of direct causality, which shows a direct link between the Norwegian and German electricity market, in terms of price effects and price dynamics.