Liquefied Natural Gas Prices and Their Relationship with a Country's Energy Mix: A Case Study for Greece

Using daily data, we investigate the relationship between European LNG prices, carbon prices (CO2), electricity wholesale prices and changes in the electricity sector's energy mix in Greece, using a vector error correction model (VECM). The results indicate that an increase in the daily average price of natural gas has the expected impact on Greece's wholesale electricity price. As expected, gas and other fossil fuels act as substitute goods, while higher imports of electricity lower prices and have a negative impact on fossil fuel shares. Interestingly, carbon prices do not appear to have any significant impact on any variables, while the higher production of electricity from renewable sources pushes wholesale electricity prices down.