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Spatial Econometrics in Electricity Markets Research

In: HANDBOOK OF ENERGY FINANCE Theories, Practices and Simulations

Author

Listed:
  • Rita De Siano
  • Alessandro Sapio

Abstract

This chapter outlines the theoretical foundations and empirical applications of spatial econometrics in energy markets research. Spatial econometrics addresses spatial autocorrelation and spatial heterogeneity, two key issues of energy finance that have emerged during the low carbon transition. Indeed, with congested grids and a high penetration of geographically heterogeneous intermittent renewables, electricity markets can be more accurately modeled and forecasted by considering spatial effects. After illustrating the main spatial aspects of electricity pricing, production, and consumption, the chapter summarizes the theory of spatial econometrics and highlights its advantages over alternative estimation methods. Existing applications of spatial econometrics to electricity markets are thus reviewed (e.g. forecasting electricity demand and wholesale electricity prices and assessing the diffusion of photovoltaics). Methodological implications and ongoing issues are discussed in the final section.

Suggested Citation

  • Rita De Siano & Alessandro Sapio, 2020. "Spatial Econometrics in Electricity Markets Research," World Scientific Book Chapters, in: Stéphane Goutte & Duc Khuong Nguyen (ed.), HANDBOOK OF ENERGY FINANCE Theories, Practices and Simulations, chapter 6, pages 121-156, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813278387_0006
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    Citations

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    Cited by:

    1. Cabral, Joilson de Assis & Freitas Cabral, Maria Viviana de & Pereira Júnior, Amaro Olímpio, 2020. "Elasticity estimation and forecasting: An analysis of residential electricity demand in Brazil," Utilities Policy, Elsevier, vol. 66(C).
    2. De Siano, Rita & Sapio, Alessandro, 2022. "Spatial merit order effects of renewables in the Italian power exchange," Energy Economics, Elsevier, vol. 108(C).
    3. Shiwen Liu & Zhen Zhang & Junhua Yang & Wei Hu, 2022. "Exploring Increasing Urban Resident Electricity Consumption: The Spatial Spillover Effect of Resident Income," Energies, MDPI, vol. 15(12), pages 1-17, June.

    More about this item

    Keywords

    Energy Finance; Financial and Economic Modeling; Volatility; Forecasting; Quantitative Finance; Energy Markets;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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