XAI Reveals Key Drivers in European Electricity Market Prices

Researchers have developed a new methodology to understand the complex factors influencing electricity prices across Europe. By integrating deep neural networks with explainable AI tools, specifically SHAP, they can now interpret the predictions made by these powerful models. This approach allows for a clearer identification of the underlying drivers of price formation in a highly interconnected market. The study found that renewable energy sources, particularly solar, have a significant impact on price formation despite their current share in total generation. Gas prices remain a consistently dominant factor, and the strong interdependencies between European electricity systems, facilitated by interconnections, play a crucial role in shaping price dynamics. The research also explored a hypothetical fully integrated EU-wide market.