IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v328y2022ics0306261922013472.html
   My bibliography  Save this article

Spatio-temporal evaluation of electricity price risk considering multiple uncertainties under extreme cold weather

Author

Listed:
  • Lin, Jianing
  • Bao, Minglei
  • Liang, Ziyang
  • Sang, Maosheng
  • Ding, Yi

Abstract

The increasing frequency of long-lasting price spikes in electricity markets caused by extreme weather has brought unbearable economic burdens to both electricity consumers and retailers, attracting wide attention on price risk evaluation and prevention. However, the precise and comprehensive evaluation of price risks has been hindered by the lack of spatio-temporal feature analysis and multi-uncertainty fusion modeling, including random failures, rapid surges in electricity demands and natural gas prices under extreme cold weather. To address this, a spatio-temporal evaluation model of electricity price risk considering the synthetic effects of multiple uncertainties is proposed based on the universal generating function (UGF) technique. Firstly, the UGF representations of standardized probabilistic models for different uncertainty factors induced by freezing temperatures are developed. On this basis, the market price calculation (MPC) operator is proposed to obtain the probabilistic model of the electricity market by aggregating these UGFs. Moreover, the spatio-temporal price risk indices are proposed to comprehensively evaluate the market risk level. Furthermore, the impact analysis based on sensitivity calculation is introduced to identify the most critical factor from multiple uncertainties. Case studies demonstrate that the extremely high price risks mainly occur during severe icing intervals and locate in the region away from major energy resources. Moreover, the surge in electricity demand is identified as the major factor for extremely high electricity prices. The findings can provide effective references for risk prevention and hedging for market operators and participants.

Suggested Citation

  • Lin, Jianing & Bao, Minglei & Liang, Ziyang & Sang, Maosheng & Ding, Yi, 2022. "Spatio-temporal evaluation of electricity price risk considering multiple uncertainties under extreme cold weather," Applied Energy, Elsevier, vol. 328(C).
    • Handle: RePEc:eee:appene:v:328:y:2022:i:c:s0306261922013472
    DOI: 10.1016/j.apenergy.2022.120090
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261922013472
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2022.120090?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Doering, Kenji & Sendelbach, Luke & Steinschneider, Scott & Lindsay Anderson, C., 2021. "The effects of wind generation and other market determinants on price spikes," Applied Energy, Elsevier, vol. 300(C).
    2. Liu, Jinqi & Wang, Jihong & Cardinal, Joel, 2022. "Evolution and reform of UK electricity market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 161(C).
    3. Sun, Mei & Li, Juan & Gao, Cuixia & Han, Dun, 2017. "Identifying regime shifts in the US electricity market based on price fluctuations," Applied Energy, Elsevier, vol. 194(C), pages 658-666.
    4. Chang, Zihan & Zhang, Yang & Chen, Wenbo, 2019. "Electricity price prediction based on hybrid model of adam optimized LSTM neural network and wavelet transform," Energy, Elsevier, vol. 187(C).
    5. Lu, Xin & Qiu, Jing & Lei, Gang & Zhu, Jianguo, 2022. "Scenarios modelling for forecasting day-ahead electricity prices: Case studies in Australia," Applied Energy, Elsevier, vol. 308(C).
    6. Peter Cramton, 2017. "Electricity market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 589-612.
    7. Li, Yan-Fu & Zio, Enrico, 2012. "A multi-state model for the reliability assessment of a distributed generation system via universal generating function," Reliability Engineering and System Safety, Elsevier, vol. 106(C), pages 28-36.
    8. Judah Cohen & Karl Pfeiffer & Jennifer A. Francis, 2018. "Warm Arctic episodes linked with increased frequency of extreme winter weather in the United States," Nature Communications, Nature, vol. 9(1), pages 1-12, December.
    9. Yating Li & William A. Pizer & Libo Wu, 2019. "Climate change and residential electricity consumption in the Yangtze River Delta, China," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 116(2), pages 472-477, January.
    10. Mu, Xiaoyi, 2007. "Weather, storage, and natural gas price dynamics: Fundamentals and volatility," Energy Economics, Elsevier, vol. 29(1), pages 46-63, January.
    11. Sensfuß, Frank & Ragwitz, Mario & Genoese, Massimo, 2008. "The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany," Energy Policy, Elsevier, vol. 36(8), pages 3076-3084, August.
    12. Akdemir, Kerem Ziya & Kern, Jordan D. & Lamontagne, Jonathan, 2022. "Assessing risks for New England's wholesale electricity market from wind power losses during extreme winter storms," Energy, Elsevier, vol. 251(C).
    13. Gao, Linyue & Tao, Tao & Liu, Yongqian & Hu, Hui, 2021. "A field study of ice accretion and its effects on the power production of utility-scale wind turbines," Renewable Energy, Elsevier, vol. 167(C), pages 917-928.
    14. Bao, Minglei & Ding, Yi & Sang, Maosheng & Li, Daqing & Shao, Changzheng & Yan, Jinyue, 2020. "Modeling and evaluating nodal resilience of multi-energy systems under windstorms," Applied Energy, Elsevier, vol. 270(C).
    15. Peng Shen & Lin Guan & Zhenlin Huang & Liang Wu & Zetao Jiang, 2018. "Active-Current Control of Large-Scale Wind Turbines for Power System Transient Stability Improvement Based on Perturbation Estimation Approach," Energies, MDPI, vol. 11(8), pages 1-15, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Donglan Liu & Xin Liu & Kun Guo & Qiang Ji & Yingxian Chang, 2023. "Spillover Effects among Electricity Prices, Traditional Energy Prices and Carbon Market under Climate Risk," IJERPH, MDPI, vol. 20(2), pages 1-18, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zarnikau, J. & Tsai, C.H. & Woo, C.K., 2020. "Determinants of the wholesale prices of energy and ancillary services in the U.S. Midcontinent electricity market," Energy, Elsevier, vol. 195(C).
    2. Nibedita, Barsha & Irfan, Mohd, 2022. "Analyzing the asymmetric impacts of renewables on wholesale electricity price: Empirical evidence from the Indian electricity market," Renewable Energy, Elsevier, vol. 194(C), pages 538-551.
    3. Mira Watermeyer & Thomas Mobius & Oliver Grothe & Felix Musgens, 2023. "A hybrid model for day-ahead electricity price forecasting: Combining fundamental and stochastic modelling," Papers 2304.09336, arXiv.org.
    4. Sheybanivaziri, Samaneh & Le Dréau, Jérôme & Kazmi, Hussain, 2024. "Forecasting price spikes in day-ahead electricity markets: techniques, challenges, and the road ahead," Discussion Papers 2024/1, Norwegian School of Economics, Department of Business and Management Science.
    5. Martin Bichler & Hans Ulrich Buhl & Johannes Knörr & Felipe Maldonado & Paul Schott & Stefan Waldherr & Martin Weibelzahl, 2022. "Electricity Markets in a Time of Change: A Call to Arms for Business Research," Schmalenbach Journal of Business Research, Springer, vol. 74(1), pages 77-102, March.
    6. Javier L'opez Prol & Wolf-Peter Schill, 2020. "The Economics of Variable Renewables and Electricity Storage," Papers 2012.15371, arXiv.org.
    7. Bjørndal, Endre & Bjørndal, Mette Helene & Coniglio, Stefano & Körner, Marc-Fabian & Leinauer, Christina & Weibelzahl, Martin, 2023. "Energy storage operation and electricity market design: On the market power of monopolistic storage operators," European Journal of Operational Research, Elsevier, vol. 307(2), pages 887-909.
    8. Bao, Minglei & Ding, Yi & Yin, Xunhu & Shao, Changzheng & Ye, Chenjin, 2021. "Definitions and Reliability Evaluation of Multi-state Systems Considering State Transition Process and its Application for Gas Systems," Reliability Engineering and System Safety, Elsevier, vol. 207(C).
    9. Atherton, John & Hofmeister, Markus & Mosbach, Sebastian & Akroyd, Jethro & Farazi, Feroz & Kraft, Markus, 2023. "British imbalance market paradox: Variable renewable energy penetration in energy markets," Renewable and Sustainable Energy Reviews, Elsevier, vol. 185(C).
    10. Kraan, Oscar & Kramer, Gert Jan & Nikolic, Igor & Chappin, Emile & Koning, Vinzenz, 2019. "Why fully liberalised electricity markets will fail to meet deep decarbonisation targets even with strong carbon pricing," Energy Policy, Elsevier, vol. 131(C), pages 99-110.
    11. McConnell, Dylan & Hearps, Patrick & Eales, Dominic & Sandiford, Mike & Dunn, Rebecca & Wright, Matthew & Bateman, Lachlan, 2013. "Retrospective modeling of the merit-order effect on wholesale electricity prices from distributed photovoltaic generation in the Australian National Electricity Market," Energy Policy, Elsevier, vol. 58(C), pages 17-27.
    12. Schreiner, Lena & Madlener, Reinhard, 2022. "Investing in power grid infrastructure as a flexibility option: A DSGE assessment for Germany," Energy Economics, Elsevier, vol. 107(C).
    13. Lamperti, Francesco & Bosetti, Valentina & Roventini, Andrea & Tavoni, Massimo & Treibich, Tania, 2021. "Three green financial policies to address climate risks," Journal of Financial Stability, Elsevier, vol. 54(C).
    14. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 541-571.
    15. Devine, Mel T. & Russo, Marianna, 2019. "Liquefied natural gas and gas storage valuation: Lessons from the integrated Irish and UK markets," Applied Energy, Elsevier, vol. 238(C), pages 1389-1406.
    16. Olukunle O. Owolabi & Kathryn Lawson & Sanhita Sengupta & Yingsi Huang & Lan Wang & Chaopeng Shen & Mila Getmansky Sherman & Deborah A. Sunter, 2022. "A Robust Statistical Analysis of the Role of Hydropower on the System Electricity Price and Price Volatility," Papers 2203.02089, arXiv.org.
    17. Keppler, Jan Horst & Quemin, Simon & Saguan, Marcelo, 2022. "Why the sustainable provision of low-carbon electricity needs hybrid markets," Energy Policy, Elsevier, vol. 171(C).
    18. Francesco Lamperti & Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Alessandro Sapio, 2018. "And then he wasn't a she : Climate change and green transitions in an agent-based integrated assessment model," Working Papers hal-03443464, HAL.
    19. Oosthuizen, Anna Maria & Inglesi-Lotz, Roula & Thopil, George Alex, 2022. "The relationship between renewable energy and retail electricity prices: Panel evidence from OECD countries," Energy, Elsevier, vol. 238(PB).
    20. Csereklyei, Zsuzsanna & Qu, Songze & Ancev, Tihomir, 2019. "The effect of wind and solar power generation on wholesale electricity prices in Australia," Energy Policy, Elsevier, vol. 131(C), pages 358-369.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:328:y:2022:i:c:s0306261922013472. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.