Electricity Prices and Generation Costs in European Futures Markets with Implications for Spain

Abstract

This paper examines the influence of the cost of natural gas, coal and emission allowances on electricity prices. Quotes from the futures market are used rather than spot quotes, and panel data analysis is applied, with each futures contract being characterised by a given maturity. Data for the UK are used, and the conclusions provide insights for the Spanish case for which fewer quotes are available. The results show that the market prices imply an increasing role of natural gas and emission allowances in determining the price of electricity