The Impact of Renewable Energy Penetration on Day-Ahead Electricity Price Volatility: A Case Study of Germany (2019-2023)

Eng. Berfin Güzelsöz

Diplomová práce

Abstract:

This thesis investigates the association between renewable energy penetration and the conditional volatility of day-ahead electricity prices in Germany over the period 2019 to 2023. As Germany’s Energiewende has progressively increased the share of wind and solar generation in the electricity mix, the intermittent and weather-dependent nature of these sources has introduced new dynamics into wholesale price formation. This study examines whether higher levels of renewable penetration are associated with greater price volatility in the German day-ahead market, as traded on the EPEX Spot exchange. The empirical strategy employs Generalised Autoregressive Conditional Heteroscedasticity (GARCH) models. A standard GARCH(1,1) model is first estimated to characterise the baseline volatility dynamics of daily electricity price returns, capturing well-documented features such as volatility clustering and time-varying conditional variance. The analysis is then extended to a GARCH-X specification, which incorporates the daily share of renewable generation as an exogenous variable directly in the conditional variance equation. This allows for a formal assessment of whether fluctuations in renewable penetration are systematically associated with changes in the conditional variance of price returns, after controlling for the autoregressive structure of volatility. The study period is of particular analytical interest because it encompasses several major structural disruptions to European energy markets, including the demand contraction induced by the COVID-19 pandemic in 2020, the escalation of natural gas prices throughout 2021 and 2022 linked to geopolitical tensions, and the subsequent period of partial market stabilization in 2023. These episodes provide a rich empirical setting in which to assess whether the relationship between renewable penetration and price volatility is stable across distinct market regimes or is itself regime-dependent. By combining time-series econometrics with a focus on renewable integration, this thesis contributes to a growing body of literature at the intersection of energy economics and financial econometrics. It seeks to inform policy discussions around market design, risk management, and the financial implications of accelerating decarbonization in liberalized electricity markets.

Keywords

German Day-Ahead Market, Electricity Price Volatility, Renewable Energy Penetration, German Electricity Market, Energy Market Design, EPEX Spot, Conditional Variance, Energiewende

Jazyk práce: angličtina

Datum vytvoření / odevzdání či podání práce: 2. 4. 2026

Obhajoba závěrečné práce

• Obhajoba proběhla 29. 5. 2026
• Vedoucí: Ing. Michal Čermák, Ph.D.
• Oponent: Jiří Čermák, externi

Česká zemědělská univerzita v Praze

Provozně ekonomická fakulta

Magisterský studijní program:
Economics and Management