Advanced Search
MyIDEAS: Login

An Empirically Based Model of the Supply Schedule in Day-Ahead Electricity Markets

Contents:

Author Info

  • Sandro Sapio

Abstract

The first part of this paper establishes some new pieces of evidence on the dynamics of prices and volumes in wholesale electricity day-ahead markets (NordPool, APX, Powernext). The growth of prices is more strongly autocorrelated than the growth of volumes; it is more more heavy-tailed; and its conditional standard deviation decays like the reciprocal of the price level (1/P scaling). In the second part of the paper, it is shown that a linear supply function with stochastic intercept and constant slope suffices to explain the 1/P scaling. Furthermore, this model allows to decompose price fluctuations in an exogenous demand effect and a strategically-driven supply effect. In light of this model, the heavier tails of price growth and its stronger autocorrelation structure are due to persistent and intermittent strategic moves by suppliers, related to expected demand growth.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.lem.sssup.it/WPLem/files/2006-12.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2006/12.

as in new window
Length:
Date of creation: 08 May 2006
Date of revision:
Handle: RePEc:ssa:lemwps:2006/12

Contact details of provider:
Postal: Piazza dei Martiri della Liberta, 33, 56127 Pisa
Phone: +39-50-883343
Fax: +39-50-883344
Email:
Web page: http://www.lem.sssup.it/
More information through EDIRC

Related research

Keywords: Electricity Markets; Supply Curve; Subbotin Distribution; Fat Tails; Scaling; Demand Effect; Supply Effect.;

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bottazzi, Giulio & Secchi, Angelo, 2003. "Why are distributions of firm growth rates tent-shaped?," Economics Letters, Elsevier, vol. 80(3), pages 415-420, September.
  2. Diebold, Francis X & Ohanian, Lee E & Berkowitz, Jeremy, 1998. "Dynamic Equilibrium Economies: A Framework for Comparing Models and Data," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 433-51, July.
  3. Green, Richard, 2006. "Market power mitigation in the UK power market," Utilities Policy, Elsevier, vol. 14(2), pages 76-89, June.
  4. Frank A. Wolak & Robert H. Patrick, 2001. "The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market," NBER Working Papers 8248, National Bureau of Economic Research, Inc.
  5. Knittel, Christopher R. & Roberts, Michael R., 2005. "An empirical examination of restructured electricity prices," Energy Economics, Elsevier, vol. 27(5), pages 791-817, September.
  6. Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Papers cond-mat/9804100, arXiv.org.
  7. Newbery, D., 2002. "Issues and Options for Restructuring Electricity Supply Industries," Cambridge Working Papers in Economics 0210, Faculty of Economics, University of Cambridge.
  8. Longstaff, Francis A & Wang, Ashley, 2002. "ELECTRICITY FORWARD PRICES: A High-Frequency Empirical Analysis," University of California at Los Angeles, Anderson Graduate School of Management qt3mw4q41x, Anderson Graduate School of Management, UCLA.
  9. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
  10. Von der Fehr, N.H.M. & Harbord, D., 1992. "Spot Market Competition in the UK Electricity Industry," Memorandum 09/1992, Oslo University, Department of Economics.
  11. Longstaff, Francis & Wang, Ashley, 2002. "Electricity Forward Prices: A High-Frequency Empirical Analysis," University of California at Los Angeles, Anderson Graduate School of Management qt7mh2m2bt, Anderson Graduate School of Management, UCLA.
  12. Rafal Weron & Michael Bierbrauer & Stefan Trück, 2003. "Modeling electricity prices: jump diffusion and regime switching," HSC Research Reports HSC/03/01, Hugo Steinhaus Center, Wroclaw University of Technology.
  13. Bottazzi, G. & Sapio, S. & Secchi, A., 2005. "Some statistical investigations on the nature and dynamics of electricity prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 54-61.
  14. Simonsen, Ingve, 2005. "Volatility of power markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 10-20.
  15. Joskow, Paul L, 1996. "Introducing Competition into Regulated Network Industries: From Hierarchies to Markets in Electricity," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 341-82.
  16. Guerci, E. & Ivaldi, S. & Pastore, S. & Cincotti, S., 2005. "Modeling and implementation of an artificial electricity market using agent-based technology," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 69-76.
  17. 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.
  18. Giulio Bottazzi & Angelo Secchi, 2005. "Explaining the Distribution of Firms Growth Rates," LEM Papers Series 2005/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  19. Byström, Hans, 2001. "Extreme Value Theory and Extremely Large Electricity Price Changes," Working Papers 2001:19, Lund University, Department of Economics.
  20. Blumsack, Seth & Perekhodtsev, Dmitri & Lave, Lester B., 2002. "Market Power in Deregulated Wholesale Electricity Markets: Issues in Measurement and the Cost of Mitigation," The Electricity Journal, Elsevier, vol. 15(9), pages 11-24, November.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ssa:lemwps:2006/12. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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