Modeling Electricity Prices: International Evidence
AbstractThis paper analyses the evolution of electricity prices in deregulated markets. We present a general model that simultaneously takes into account the possibility of several factors: seasonality, mean reversion, GARCH behaviour and time-dependent jumps. The model is applied to equilibrium spot prices of electricity markets from Argentina, Australia (Victoria), New Zealand (Hayward), NordPool (Scandinavia), Spain and U.S. (PJM) using daily data. Six different nested models were estimated to compare the relative importance of each factor and their interactions. We obtained that electricity prices are mean-reverting with strong volatility (GARCH) and jumps of time-dependent intensity even after adjusting for seasonality. We also provide a detailed unit root analysis of electricity prices against mean reversion, in the presence of jumps and GARCH errors, and propose a new powerful procedure based on bootstrap techniques.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we022708.
Date of creation: Jun 2002
Date of revision:
Other versions of this item:
- Alvaro Escribano & J. Ignacio Peña & Pablo Villaplana, 2011. "Modelling Electricity Prices: International Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(5), pages 622-650, October.
- NEP-ALL-2003-03-03 (All new papers)
- NEP-COM-2003-03-03 (Industrial Competition)
- NEP-ENE-2003-03-10 (Energy Economics)
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