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In this paper, we propose dynamic, short-term, financial risk management strategies for small electricity producers and buyers that trade in the wholesale electricity markets. Since electricity is mostly nonstorable, financial risk coming from extremely volatile electricity prices cannot be reduced by using standard finance-based approaches. Instead, a short-term operational planing and a proper trade diversification might be used. In this paper, we analyze the price risk in terms of the Markowitz mean–variance portfolio theory. Hence, it is crucial to forecast properly the variance of electricity prices. To this end, we jointly model day-ahead and intraday or balancing prices from Germany and Poland using ARX-GARCH type models. We show that using heteroscedastic volatility significantly improves probabilistic price forecasts according to the pinball score, especially if variance stabilizing transformation is applied prior to a model estimation. The price forecasts are then used for construction of dynamic diversification strategies that are based on volatility-type risk measures. We consider different objectives as well as a buyer's and a seller's perspective. The proposed strategies are applied for the diversification of trade among different markets in Germany and Poland. We show that the objective of the strategy can be achieved using the proposed approach, but the risk minimization is usually related to lower profits. We find that risk minimization is especially important for a seller in both markets, while for a buyer a profit maximization objective leads to a more optimal risk–return trade-off. [ABSTRACT FROM AUTHOR]

The energy crisis in Europe in 2022 and its consequences have brought changes to approaches towards the issue of energy security, energy policy, and the ability to react to crisis phenomena in the energy market in a short period of time. European countries that are dependent on Russian fossil fuels have faced numerous dilemmas and challenges in 2022. This paper aims to analyse the instruments and energy policies introduced as the reactions of European countries, specifically with the examples of Poland and Germany, to the ongoing fossil fuel crisis in the context of a short period. Due to the specificity of the energy market, the countries' energy policies mainly concern long- and medium-term goals. In 2022, there was an unprecedented situation in which many European countries had to make significant changes to their fossil fuel imports quickly. We analyse and evaluate how two European countries that are heavily reliant on imported energy resources responded in a short time to the necessity of modifying their patterns of fossil fuel supply and demand. The results of our research are models that illustrate both countries' reactions to the disturbances in the energy market during the initial months of the energy crisis. As part of the research, we conducted an analysis of the energy mix of Poland and Germany, their import energy dependency, and self-sufficiency. We then compared them with the short-term energy policies of both countries. As a result, we elaborate on a comparative analysis of the models of Poland's and Germany's responses to the crisis. The research also assesses the similarities and differences in the response models in Poland's and Germany's short-term energy security policies. The results of our research may help, in the future, to choose the available short-term instruments in the energy policy of countries in the face of a sudden need resulting from disruptions in supply chains. The article contributes to the future discussion on renewed national and regional energy security, as well as efficiency concepts. Our research findings could be valuable in selecting appropriate short-term energy policy tools for countries during supply chain disruptions. This article provides significant input for future deliberations on enhancing national and regional energy security, and also efficiency strategies. [ABSTRACT FROM AUTHOR]