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Directional Spillover of Fossil Fuels Prices on a Hydrothermal Power Generation Market

Author

Listed:
  • Andr s Oviedo-G mez

    (School of Electrical and Electronic Engineering, Universidad del Valle, Cali, Colombia)

  • Sandra Milena Londo o-Hern ndez

    (School of Electrical and Electronic Engineering, Universidad del Valle, Cali, Colombia)

  • Diego Fernando Manotas-Duque

    (School of Industrial Engineering, Universidad del Valle, Cali, Colombia)

Abstract

The Colombian electricity market is based on a hydrothermal power generation market with a strong dependence on exogenous variables such as fossil fuel prices and climatology factors. Besides, the Colombian economy is characterizable by relevant mining-energy activities. Therefore, the main objective of this research was to evaluate the directional spillovers between the electricity spot prices and gas, coal, and crude oil prices and thus provide relevant information for the electricity market agents to identify the risk related to energy commodity price fluctuations. The dataset used in this research consists of monthly logarithmic returns of energy prices between September 2009 and December 2019. The main finding shows that the system's average connectedness is 13,6%. Besides, the electricity spot prices are net shock receivers of volatility, and 20% of their dynamic is related to fossil fuel price fluctuations.

Suggested Citation

  • Andr s Oviedo-G mez & Sandra Milena Londo o-Hern ndez & Diego Fernando Manotas-Duque, 2023. "Directional Spillover of Fossil Fuels Prices on a Hydrothermal Power Generation Market," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 85-90, January.
    • Handle: RePEc:eco:journ2:2023-01-12
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    More about this item

    Keywords

    directional connectedness; hydrothermal power generation markets; volatility spillovers; energy prices; vector autoregression model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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