It is well known that day-ahead prices in power markets exhibit spikes. These spikes are sudden increases in the day-ahead price that occur because power production is not flexible enough to respond to demand and/or supply shocks in the short term. This paper focuses on how temperature influences the probability on a spike. The paper shows that the difference between the actual and expected temperature significantly influences the probability on a spike and that the impact of temperature on spike probability depends on the season.

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Keywords Day-ahead power price, Power production, Spike probability, Temperature
JEL G3, Corporate Finance and Governance (jel), M, Business Administration and Business Economics; Marketing; Accounting (jel), N7, Transport, International and Domestic Trade, Energy, Technology, and Other Services (jel)
Publisher Erasmus Research Institute of Management (ERIM)
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