European Business Schools Librarian's Group
Working Papers,
Copenhagen Business School, Department of Economics
No 13-2024: Measuring a Paradox: Zero-negative Electricity Prices
Daniel Davi-Arderius () and Tooraj Jamasb ()
Additional contact information
Daniel Davi-Arderius: University of Barcelona, Postal: Business and Economy Faculty, Universitat de Barcelona, C/ John M. Keynes, 1-11,, 08034 Barcelona
Tooraj Jamasb: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark
Abstract: With the increasing participation of renewable sources, prices of energy commodity in the day-ahead markets have been decreasing and in increasing number of hours to zero or even negative prices. However, in hours with prices and charges equal or below zero, end-users may still pay significant prices for the ‘free’ electricity, which presents a paradox. This paper analyses the zero-negative price paradox in a highly decarbonized electricity market. We use Seasonal ARIMA methods with hourly data from the Spanish power system (2021-2024). We find that non-energy system costs increase when day-ahead prices decrease. Thus, customers do not receive efficient price signals to adjust their consumption when more renewables are available. In other words, some benefits of lower prices seem to be traded-off with this “price paradox”. Similar results can be anticipated in other countries with increasing share of renewables. Future studies of welfare impact of electricity prices should consider how to minimize these increasing non-energy costs.
Keywords: Energy-only market; Day-ahead electricity markets; Negative prices; Renewables; Decarbonization; Ancillary services
Language: English
21 pages, August 17, 2024
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