The volatility of prices in the English and Welsh electricity pool
The volatility of spot prices has been a notable feature of the English and Welsh Electricity Pool since its formation in 1990. This study investigates the possibility that the volatility of spot prices is strongly affected by the functioning of the contract market for electricity. This paper suggest that generators with market power may have an incentive to create volatility in the spot market in order to benefit from higher risk premia in the contract market. A simple theoretical model is used to illustrate this argument. Nonparametric techniques are used to test for changes in volatility after the expiry of the coal contracts in 1993 and during the price cap of 1994-1996. Strongly significant increases in volatility are found in the latter period.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 34 (2002)
Issue (Month): 12 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:34:y:2002:i:12:p:1487-1495. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.