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When Supply Meets Demand: The Case of Hourly Spot Electricity Prices

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Author Info
Alexander Boogert (Department of Economics, Mathematics & Statistics, Birkbeck)
Dominique Dupont
Abstract

We use a supply-demand framework to model the hourly day-ahead spot price of electricity based on publicly available information. With the model we can forecast the level and the probability of a spike in the spot price de¯ned as the spot price being above a certain threshold. Several European countries have recently started publishing day-ahead forecasts of the available supply. In this paper we show potential uses of such indicators and test their forecasting power in an hourly spot price model. We conclude that a forecast of the available supply can be part of a useful indicator and discuss ways to further improve the forecasts.

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File URL: http://www.ems.bbk.ac.uk/research/wp/PDF/BWPEF0707.pdf
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File Function: First version, 2007
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Paper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 0707.

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Date of creation: Jan 2007
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Handle: RePEc:bbk:bbkefp:0707

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  1. Álvaro Cartea & Marcelo Figueroa, 2005. "Pricing in Electricity Markets: A Mean Reverting Jump Diffusion Model with Seasonality," Applied Mathematical Finance, Taylor and Francis Journals, vol. 12(4), pages 313-335, December. [Downloadable!] (restricted)
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  2. Kanamura, Takashi & Ohashi, Kazuhiko, 2007. "A structural model for electricity prices with spikes: Measurement of spike risk and optimal policies for hydropower plant operation," Energy Economics, Elsevier, vol. 29(5), pages 1010-1032, September. [Downloadable!] (restricted)
  3. Hendrik Bessembinder & Michael L. Lemmon, 2002. "Equilibrium Pricing and Optimal Hedging in Electricity Forward Markets," Journal of Finance, American Finance Association, vol. 57(3), pages 1347-1382, 06. [Downloadable!] (restricted)
  4. Boogert, Alexander & Dupont, Dominique, 2005. "The nature of supply side effects on electricity prices: The impact of water temperature," Economics Letters, Elsevier, vol. 88(1), pages 121-125, July. [Downloadable!] (restricted)
  5. Huisman, Ronald & Mahieu, Ronald, 2003. "Regime jumps in electricity prices," Energy Economics, Elsevier, vol. 25(5), pages 425-434, September. [Downloadable!] (restricted)
    Other versions:
    • Huisman, R. & Mahieu, R.J., 2001. "Regime Jumps in Electricity Prices," Research Paper ERS-2001-48-F&A Revision_, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
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