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Econometric Estimation of Spatial Patterns in Electricity Prices


  • Stratford M. Douglas
  • Julia N. Popova


Information about the spatial structure of the transmission grid is relevant to understanding and predicting electricity prices, but this information has not been incorporated into empirical models of electricity prices in the literature. We propose the use of spatial econometric panel methods, discuss their formal characteristics in the context of electricity price data, and provide an application to a panel of PJM price data. Our econometric model includes a simple representation of the transmission system, and provides information about the effect of system constraints on the extent of electricity market integration. Empirical results confirm the existence of spatial patterns in electricity prices and illustrate their impact on estimation, forecasting, and interpolation.

Suggested Citation

  • Stratford M. Douglas & Julia N. Popova, 2011. "Econometric Estimation of Spatial Patterns in Electricity Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 81-106.
  • Handle: RePEc:aen:journl:2011v32-02-a04

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    References listed on IDEAS

    1. De Vany, Arthur S & Walls, W David, 1999. "Price Dynamics in a Network of Decentralized Power Markets," Journal of Regulatory Economics, Springer, vol. 15(2), pages 123-140, March.
    2. De Vany, Arthur S. & Walls, W. David, 1999. "Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US," Energy Economics, Elsevier, vol. 21(5), pages 435-448, October.
    3. Giacomini, Raffaella & Granger, Clive W. J., 2004. "Aggregation of space-time processes," Journal of Econometrics, Elsevier, vol. 118(1-2), pages 7-26.
    4. Arciniegas, Ismael & Barrett, Chris & Marathe, Achla, 2003. "Assessing the efficiency of US electricity markets," Utilities Policy, Elsevier, vol. 11(2), pages 75-86, June.
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    Cited by:

    1. Eric Bowen & Donald J. Lacombe, 2015. "Spatial interaction of Renewable Portfolio Standards and their effect on renewable generation within NERC regions," Working Papers 15-03, Department of Economics, West Virginia University.
    2. Chi-Keung Woo, Ira Horowitz, Brian Horii, Ren Orans, and Jay Zarnikau, 2012. "Blowing in the Wind: Vanishing Payoffs of a Tolling Agreement for Natural-gas-fired Generation of Electricity in Texas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Woo, C.K. & Moore, J. & Schneiderman, B. & Ho, T. & Olson, A. & Alagappan, L. & Chawla, K. & Toyama, N. & Zarnikau, J., 2016. "Merit-order effects of renewable energy and price divergence in California’s day-ahead and real-time electricity markets," Energy Policy, Elsevier, vol. 92(C), pages 299-312.
    4. Chi-Keung Woo, Ira Horowitz, Jay Zarnikau, Jack Moore, Brendan Schneiderman, Tony Ho, and Eric Leung, 2016. "What Moves the Ex Post Variable Profit of Natural-Gas-Fired Generation in California?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    5. repec:aen:journl:ej38-5-haldru is not listed on IDEAS
    6. repec:eee:energy:v:144:y:2018:i:c:p:887-902 is not listed on IDEAS
    7. Girum Dagnachew Abate & Niels Haldrup, 2017. "Space-time modeling of electricity spot prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    8. repec:eee:appene:v:204:y:2017:i:c:p:531-543 is not listed on IDEAS
    9. repec:aen:journl:ej38-3-bowen is not listed on IDEAS
    10. Lei Jiang & Minhe Ji, 2016. "China’s Energy Intensity, Determinants and Spatial Effects," Sustainability, MDPI, Open Access Journal, vol. 8(6), pages 1-15, June.

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    JEL classification:

    • F0 - International Economics - - General


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