| Abstract [eng] |
The purpose of this master’s thesis is to evaluate the formation of the electricity prices in Lithuania and to identify the main factors that have effect to said formation in the short and long term. This thesis consists of four main parts: a theoretical analysis of the electricity market, an analysis of Lithuania’s electricity market and overall electricity structure over the years, a methodological analysis for different econometric models and various approaches, and the empirical analysis with the assessment of the results. The theoretical part analyses the principles of the electricity market and how different market segments operate in the „Nord Pool” market and how electricity price formation operates. A lot of attention is given to the different factors affecting price formation, including natural gas prices, electricity generation structure, the integration of renewable energy sources, demand, and the role of macroeconomic factors. The methodology section covers the selection of models, the choice of variables in the end analysis and the formation of hypotheses. The meaning for selecting used models and variables is explained. Hypotheses are formulated on theoretical insights and previous empirical studies. The thesis applied correlation and regression analyses, stationarity test, johansen cointegration tests, and a vector error correction model (VECM). Additionally, impulse response functions (IRF) and forecast error variance decomposition (FEVD) analyses were used to analyze the shock of the variables on electricity prices. The results showed a long-term relationship between electricity and natural gas prices, while in the short term, various fluctuations were explained by changes in demand, overall generation structure, and variations in renewable energy production. The conclusion summarized the results of the research conducted and the literature analysis while providing recommendations related to price analysis and interpretation of electricity prices. It is stated that the formation of electricity prices in Lithuania is determined by domestic market factors, the balance of electricity demand, the structure of various generation sources, as well as changes in international markets such as natural gall prices. |
