ASSESSING THE INFLUENCE OF NATURAL GAS PRICE SHOCKS ON DAY-AHEAD ELECTRICITY PRICES IN SWEDEN : An OLS- and Quantile Regression Approach

Sammanfattning: This paper examines how day-ahead electricity prices in Sweden are affected by increased natural gas prices, and studies to see if electricity prices in different bidding areas are affected differently by increased natural gas prices. This paper does so by conducting both an OLS regression and a quantile regression, estimated on the 90th quantile. These regression models indicate that increased natural gas prices has a significant influence on day-ahead electricity prices in Sweden. Moreover, the results of this paper show that Swedish electricity prices are related to natural gas prices, as empirical evidence reveal that higher natural gas prices imply higher day-ahead electricity prices in Sweden, and this relation is strongest for day-ahead electricity prices in SE4 and weakest for SE1 and SE2. Furthermore, all bidding areas are influenced by increased natural gas prices when electricity prices are high, despite that Sweden does not possess any natural gas dependent electricity generation.