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Price Dynamics in a Network of Decentralized Power Markets

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  • De Vany, Arthur S
  • Walls, W David

Abstract

In this paper, we model the dynamic behavior of prices in a network of interconnected, but decentralized, electric power markets--an architecture very different from the centralized exchanges and power pools currently being implemented by many state regulators. We estimate dynamic equations of unregulated, wholesale power prices at spot markets scattered over an eleven-state trading region. The results indicate that this decentralized system of power and transmission trading produces prices that are efficient and dynamically stable over this vast network. Price convergence in the power market is similar to what has been observed in the recently deregulated natural gas market. Copyright 1999 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 15 (1999)
Issue (Month): 2 (March)
Pages: 123-40

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Handle: RePEc:kap:regeco:v:15:y:1999:i:2:p:123-40

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Web page: http://www.springerlink.com/link.asp?id=100298

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Cited by:
  1. Higgs, Helen, 2009. "Modelling price and volatility inter-relationships in the Australian wholesale spot electricity markets," Energy Economics, Elsevier, vol. 31(5), pages 748-756, September.
  2. Chi-Keung Woo, Ira Horowitz, Brian Horii, Ren Orans, and Jay Zarnikau, 2012. "Blowing in the Wind: Vanishing Payoffs of a Tolling Agreement for Natural-gas-fired Generation of Electricity in Texas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
  3. Worthington, Andrew & Kay-Spratley, Adam & Higgs, Helen, 2005. "Transmission of prices and price volatility in Australian electricity spot markets: a multivariate GARCH analysis," Energy Economics, Elsevier, vol. 27(2), pages 337-350, March.
  4. Helen Higgs & Andrew C. Worthington, 2005. "Systematic Features of High-Frequency Volatility in Australian Electricity Markets: Intraday Patterns, Information Arrival and Calendar Effects," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 23-42.
  5. Forgionne, Guisseppi & Guo, Zhiling, 2009. "Internal supply chain coordination in the electric utility industry," European Journal of Operational Research, Elsevier, vol. 196(2), pages 619-627, July.
  6. Arciniegas, Ismael & Barrett, Chris & Marathe, Achla, 2003. "Assessing the efficiency of US electricity markets," Utilities Policy, Elsevier, vol. 11(2), pages 75-86, June.
  7. Andrew C. Worthington & Helen Higgs, 2003. "A multivariate GARCH analysis of the domestic transmission of energy commodity prices and volatility: A comparison of the peak and off-peak periods in the Australian electricity spot market," School of Economics and Finance Discussion Papers and Working Papers Series 140, School of Economics and Finance, Queensland University of Technology.
  8. Mansur, Erin T. & Olmstead, Sheila M., 2006. "The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations," Working paper 228, Regulation2point0.
  9. Ciarreta Antuñano, Aitor & Zárraga Alonso, Ainhoa, 2012. "Analysis of volatility transmissions in integrated and interconnected markets: The case of the Iberian and French markets," BILTOKI Biltoki;2012-04, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
  10. Bruno Bosco & Lucia Parisio & Matteo Pelagatti & Fabio Baldi, 2010. "Long-run relations in european electricity prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(5), pages 805-832.
  11. Andrew Kleit & James Reitzes, 2008. "The effectiveness of FERC’s transmission policy: is transmission used efficiently and when is it scarce?," Journal of Regulatory Economics, Springer, vol. 34(1), pages 1-26, August.
  12. Park, Haesun & Mjelde, James W. & Bessler, David A., 2006. "Price dynamics among U.S. electricity spot markets," Energy Economics, Elsevier, vol. 28(1), pages 81-101, January.
  13. Rammerstorfer, Margarethe & Wagner, Christian, 2009. "Reforming minute reserve policy in Germany: A step towards efficient markets?," Energy Policy, Elsevier, vol. 37(9), pages 3513-3519, September.
  14. Bunn, Derek W. & Gianfreda, Angelica, 2010. "Integration and shock transmissions across European electricity forward markets," Energy Economics, Elsevier, vol. 32(2), pages 278-291, March.

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