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A GARCH Model to Understand the Volatility of the Electricity Spot Price in Brazil

Author

Listed:
  • André Luis da Silva Leite

    (Federal University of Santa Catarina, Brazil.)

  • Marcus Vinicius Andrade de Lima

    (Federal University of Santa Catarina, Brazil.)

Abstract

Electricity is sensitive to extreme price events and spot price volatility is an inherent characteristic of competitive electricity markets. The purpose of this article it to model the realized volatility of electricity spot price in Brazil. The Brazilian electricity industry presents unique characteristics and because of this price varies a lot in a short period. So, we developed a GARCH model using 862 weekly observations to understand the realized volatility in the four different market. We conclude that the spot price in Brazil presents high volatility that presents risk to agents. This high volatility is associated with institutional factors and the increase in the share of renewable energy in the electricity mix.

Suggested Citation

  • André Luis da Silva Leite & Marcus Vinicius Andrade de Lima, 2023. "A GARCH Model to Understand the Volatility of the Electricity Spot Price in Brazil," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 332-338, September.
    • Handle: RePEc:eco:journ2:2023-05-38
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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