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.

Modern electricity markets are complex socio-technical systems in which price formation results from interactions among physical, economic, operational, and institutional mechanisms. Under the European Target Model, the sequential coupling of Day-Ahead, Intraday, and Balancing Markets, together with renewable variability, cross-border exchanges, system imbalances, reserve activation, and settlement mechanisms, creates an interconnected nonlinear system. This study investigates the interaction structure underlying Market Clearing Price (MCP) formation in the Greek electricity market using variance-based Global Sensitivity Analysis. A Sparse Polynomial Chaos Expansion (PCE) surrogate represents MCP as a function of sixteen variables describing generation technologies, demand, cross-border exchanges, balancing-energy activation, system imbalances, reserves, and Uplift Accounts. Sobol sensitivity analysis decomposes MCP variance into individual, pairwise, and higher-order contributions. Natural-gas generation emerges as the dominant first-order driver, whereas hydropower constitutes the principal nonlinear interaction hub, linking domestic flexibility with renewable generation and cross-border exchanges. Individual effects account for approximately 74.5% of MCP variance, pairwise interactions for 19.1%, and higher-order effects for 6.4%. The strongest nonlinear interactions involve hydropower with exports, imports, and renewable generation, demonstrating that variables with moderate individual importance may nevertheless play structurally important roles through their interactions. These findings show that MCP variability cannot be explained solely by isolated market fundamentals but reflect the coupled operation of scheduling, flexibility, European market integration, renewable variability, and balancing mechanisms. The Sparse PCE–Sobol framework therefore provides an interpretable computational approach for revealing the interaction architecture of interconnected electricity markets as complex systems.