Analysing drivers and interdependencies in European electricity markets using XAI

Renewable energy has outsized influence on electricity prices: Solar and other renewable sources disproportionately drive price formation across European markets despite representing a smaller share of total power generation, suggesting that even modest changes in renewable output can significantly impact prices.

Gas prices remain the most consistent market driver: Across all 39 European bidding zones analyzed, gas prices emerged as a dominant and stable determinant of electricity prices, indicating that fossil fuel markets continue to be a critical factor in price formation even as renewable capacity grows.

Regional electricity markets are deeply interconnected: The analysis reveals that interconnections between regions significantly shape price dynamics, demonstrating that European electricity systems are highly interdependent—meaning price changes in one area ripple across multiple markets.

XAI techniques can unlock insights from complex AI models: By applying explainable AI methods (SHAP) to deep neural networks, researchers were able to identify specific drivers of electricity prices that would otherwise remain hidden in a "black box" model, showing how XAI can make powerful AI systems more useful for policy and business decisions.

A fully integrated EU electricity market would function differently: The paper's counterfactual analysis of a single EU-wide market suggests that current fragmented regional markets produce different price dynamics than a hypothetical fully integrated system, with implications for future market design and policy.