Abstract
This paper investigates the interaction and price discovery mechanisms among the day-ahead, intraday, and balancing segments of the Greek wholesale electricity market under the European Target Model, emphasizing their contribution to a sustainable and flexible energy transition. Using a Vector Error Correction Model with exogenous variables (VECMX), hourly data from 2023 to September 2025 are analyzed, incorporating key system fundamentals and regime-dependent dynamics. The results reveal a hierarchical market structure in which the day-ahead market dominates long-run price discovery, the intraday market acts as a short-run adjustment mechanism, and the balancing market reflects real-time system conditions associated with renewable energy variability and system reliability. Forecast Error Variance Decomposition shows that day-ahead shocks explain most long-run price variation, while balancing market effects are mainly transitory. Cointegration analysis confirms stable long-run relationships among market segments, with imbalance prices anchored to forward market outcomes and moderated by intraday adjustments. Robustness tests based on alternative recursive orderings and Generalized Impulse Response Functions (GIRFs) confirm the stability of the results and the dominant role of the day-ahead market in price discovery. The findings have important policy implications for market design and sustainability, highlighting the role of integrated day-ahead, intraday, and balancing markets in supporting renewable energy integration, system flexibility, and the transition toward a resilient low-carbon electricity system. The Greek electricity market is gradually evolving toward a mature and resilient Target Model structure capable of supporting higher renewable energy penetration, improved operational flexibility, and enhanced market efficiency within the European decarbonization framework.