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On the impact of weather on German hourly power prices

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  • Kosater, Peter
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    Abstract

    The liberalization of electricity markets has triggered research in econometric modelling and forecasting of electricity spot prices. Moreover, both the demand and the supply of electricity are subject to weather conditions. Therefore, we examine the relation between hourly electricity spot prices from the European Energy Exchange and weather, represented by temperature and wind velocity. Furthermore, we assess whether the relation can be successfully exploited for forecasting. Thereby, we proceed in the framework of Markov regime-switching models which have become a workhorse in econometric modelling of electricity spot prices. As a result, we detect a strong relationship, on one hand. On the other hand, the significance of this relation for forecasting is confined to certain hours. --

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    Bibliographic Info

    Paper provided by University of Cologne, Department for Economic and Social Statistics in its series Discussion Papers in Statistics and Econometrics with number 1/06.

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    Date of creation: 2006
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    Handle: RePEc:zbw:ucdpse:106

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    Keywords: Electricity spot prices; Weather; Markov regime-switching;

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    References

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    1. Mount, Timothy D. & Ning, Yumei & Cai, Xiaobin, 2006. "Predicting price spikes in electricity markets using a regime-switching model with time-varying parameters," Energy Economics, Elsevier, Elsevier, vol. 28(1), pages 62-80, January.
    2. Kim, C-J., 1991. "Dynamic Linear Models with Markov-Switching," Papers, York (Canada) - Department of Economics 91-8, York (Canada) - Department of Economics.
    3. Marius Ooms & M. Angeles Carnero & Siem Jan Koopman, 2004. "Periodic Heteroskedastic RegARFIMA models for daily electricity spot prices," Econometric Society 2004 Australasian Meetings, Econometric Society 158, Econometric Society.
    4. Kosater, Peter & Mosler, Karl, 2005. "Can Markov-regime switching models improve power price forecasts? Evidence for German daily power prices," Discussion Papers in Statistics and Econometrics 1/05, University of Cologne, Department for Economic and Social Statistics.
    5. Huisman, Ronald & Mahieu, Ronald, 2003. "Regime jumps in electricity prices," Energy Economics, Elsevier, Elsevier, vol. 25(5), pages 425-434, September.
    6. Michael Bierbrauer & Stefan Trueck & Rafal Weron, 2005. "Modeling electricity prices with regime switching models," Econometrics, EconWPA 0502005, EconWPA.
    7. Rafal Weron & Adam Misiorek, 2005. "Forecasting Spot Electricity Prices With Time Series Models," Econometrics, EconWPA 0504001, EconWPA.
    8. Crespo Cuaresma, Jesús & Hlouskova, Jaroslava & Kossmeier, Stephan & Obersteiner, Michael, 2004. "Forecasting electricity spot-prices using linear univariate time-series models," Applied Energy, Elsevier, Elsevier, vol. 77(1), pages 87-106, January.
    9. Alvaro Escribano & Juan Ignacio Peña & Pablo Villaplana, 2002. "Modeling Electricity Prices: International Evidence," Economics Working Papers we022708, Universidad Carlos III, Departamento de Economía.
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    Cited by:
    1. Karakatsani, Nektaria V. & Bunn, Derek W., 2008. "Intra-day and regime-switching dynamics in electricity price formation," Energy Economics, Elsevier, Elsevier, vol. 30(4), pages 1776-1797, July.
    2. Huisman, Ronald, 2008. "The influence of temperature on spike probability in day-ahead power prices," Energy Economics, Elsevier, Elsevier, vol. 30(5), pages 2697-2704, September.
    3. Christian Huurman & Francesco Ravazzolo & Chen Zhou, 2010. "The power of weather," DNB Working Papers, Netherlands Central Bank, Research Department 236, Netherlands Central Bank, Research Department.
    4. Karakatsani, Nektaria V. & Bunn, Derek W., 2008. "Forecasting electricity prices: The impact of fundamentals and time-varying coefficients," International Journal of Forecasting, Elsevier, Elsevier, vol. 24(4), pages 764-785.

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