Drivers of price volatility in Romania’s electricity markets

The paper examines the price volatility, key determinants, and autoregressive distributed lag (ARDL) framework of Romania’s Intraday Continuous Market (IDC) during the summer months. The stability of the ARDL-ECM coefficients is assessed using the cumulative sum (CUSUM) test. We explore the interaction between IDC and Day-Ahead Market (DAM) prices, alongside the influence of economic and environmental variables, including traded volumes, consumption, export/import and the generation mix. Using hourly data and econometric techniques, we identify significant short- and long-run relationships between IDC prices and their drivers. DAM prices exhibit a strong positive impact on IDC prices, reflecting tight market integration. Higher shares of Renewable Energy Sources (RES) such as wind and solar are associated with increased IDC prices, highlighting challenges in integrating intermittent resources. Conventional sources, particularly coal and oil/gas, also elevate prices due to higher marginal costs. Conversely, electricity consumption is negatively related to IDC prices, suggesting that anticipated demand patterns may contribute to system stability. The findings carry implications for policymakers, indicating a need for enhanced forecasting, flexible resources and improved inter-market coordination to ensure price stability and efficient integration of RES.