Analysis of price peaks on Danish electricity market

The year 2010 has shown unusually high spread between East and West Denmark wholesale electricity prices. The difference was particularly visible during certain hours of the year when prices in East Denmark exceeded 1000 EUR/MWh level. This paper provides detailed analysis on the issue supported by the market model created in Plexos software. Reasons for price spikes in 2010 are presented and forecast for the future years is provided. Results suggest that the main reason behind high electricity prices in East Denmark in 2010 was mothballing of production units which resulted in the real availability of generation capacity in the region being much lower than that reported. As thermal electricity sources are expected to be further replaced by wind generation during the next decade, the risks of price spikes in the region may increase.