The aim of this paper is to analyse the price convergence between the German (EEX) and the Hungarian (HUPX) power exchanges, in the case of daily average DAM prices. Many articles have sought to explain the persistent spread between the two markets but there is no accepted consensus among the oft appearing hypotheses.

The paper focuses on the 2011-2013 period, and three hypotheses are established to explain the spread: i) insufficient net transfer capacity (NTC) on the northern borders (especially with Slovakia) for equalization between the markets; ii) unfavourable hydrological conditions in the Balkan area that lead to increased demand for Hungarian imports and push up prices in Hungary; iii) non-planned domestic power plant outages increase the Hungarian price. The methodology applies crosstabs and linear regression. With the cross-tabs, the effect of both the Slovakian and Austrian NTC, the Balkan precipitation and the non-planned outages on the spread are tested. All these have been proved to have a significant effect on the price difference. Linear regression reaches almost the same conclusions, however effect of non-planned power plant outages is not significant. Both cases the higher vulnerability of weekends is demonstrated. Finally the effect of the above used variables is tested with the 2015 version of REKK’s European Electricity Market Model (EEMM). The model confirms the above findings, except that the higher spread appears in peakload periods.