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Seasonal factors and outlier effects in rate of return on electricity spot prices in Australia's National Electricity Market

Author

Listed:
  • Stuart Thomas
  • Vikash Ramiah
  • Heather Mitchell
  • Richard Heaney

Abstract

This article documents seasonal patterns and other characteristics of electricity spot prices in the Australian National Electricity Market (NEM), over a 7-year sample period. The goal is to investigate more specifically the influence of seasonalities and outliers noted in the body of literature on electricity prices. The results confirm that electricity prices exhibit significant time-of-day and day-of-week effects and monthly and yearly effects are significant to a lesser degree. Extremely high spikes in the price series are an important characteristic of electricity prices and are shown to be a highly significant component of returns behaviour. Negative prices are unusual in financial time series data but occur in Australian electricity prices and are found to be influential on returns. The implications of these finding are that seasonal and outlier effects should not be ignored in efforts to model electricity prices.

Suggested Citation

  • Stuart Thomas & Vikash Ramiah & Heather Mitchell & Richard Heaney, 2011. "Seasonal factors and outlier effects in rate of return on electricity spot prices in Australia's National Electricity Market," Applied Economics, Taylor & Francis Journals, vol. 43(3), pages 355-369.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:3:p:355-369
    DOI: 10.1080/00036840802570421
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    References listed on IDEAS

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    Cited by:

    1. Renato Fernandes & Isabel Soares, 2022. "Reviewing Explanatory Methodologies of Electricity Markets: An Application to the Iberian Market," Energies, MDPI, vol. 15(14), pages 1-17, July.
    2. Sinha, Pankaj & Mathur, Kritika, 2016. "Empirical Analysis of Developments in the Day Ahead Electricity Markets in India," MPRA Paper 72969, University Library of Munich, Germany.
    3. Eichler, M. & Türk, D., 2013. "Fitting semiparametric Markov regime-switching models to electricity spot prices," Energy Economics, Elsevier, vol. 36(C), pages 614-624.
    4. Eichler, M. & Grothe, O. & Manner, H. & Türk, D.D.T., 2012. "Modeling spike occurrences in electricity spot prices for forecasting," Research Memorandum 029, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    5. Eichler, M. & Türk, D.D.T., 2012. "Fitting semiparametric Markov regime-switching models to electricity spot prices," Research Memorandum 035, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    6. Mwampashi, Muthe Mathias & Nikitopoulos, Christina Sklibosios & Konstandatos, Otto & Rai, Alan, 2021. "Wind generation and the dynamics of electricity prices in Australia," Energy Economics, Elsevier, vol. 103(C).
    7. Denny, Eleanor & O'Mahoney, Amy & Lannoye, Eamonn, 2017. "Modelling the impact of wind generation on electricity market prices in Ireland: An econometric versus unit commitment approach," Renewable Energy, Elsevier, vol. 104(C), pages 109-119.
    8. Lars Ivar Hagfors & Hilde Hørthe Kamperud & Florentina Paraschiv & Marcel Prokopczuk & Alma Sator & Sjur Westgaard, 2016. "Prediction of extreme price occurrences in the German day-ahead electricity market," Quantitative Finance, Taylor & Francis Journals, vol. 16(12), pages 1929-1948, December.
    9. Yasir Alsaedi & Gurudeo Anand Tularam & Victor Wong, 2019. "Application of ARIMA Modelling for the Forecasting of Solar, Wind, Spot and Options Electricity Prices: The Australian National Electricity Market," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 263-272.
    10. Sheybanivaziri, Samaneh & Le Dréau, Jérôme & Kazmi, Hussain, 2024. "Forecasting price spikes in day-ahead electricity markets: techniques, challenges, and the road ahead," Discussion Papers 2024/1, Norwegian School of Economics, Department of Business and Management Science.
    11. Stephen Machin & Olivier Marie & Sunčica Vujić, 2012. "Youth Crime and Education Expansion," German Economic Review, Verein für Socialpolitik, vol. 13(4), pages 366-384, November.
    12. Abban, Abdul Rashid & Hasan, Mohammad Z., 2021. "Solar energy penetration and volatility transmission to electricity markets—An Australian perspective," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 434-449.
    13. Per B. Solibakke, 2022. "Step‐ahead spot price densities using daily synchronously reported prices and wind forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(1), pages 17-42, January.
    14. Størdal, Ståle & Ewald, Christian-Oliver & Lien, Gudbrand & Haugom, Erik, 2023. "Trading time seasonality in electricity futures," Journal of Commodity Markets, Elsevier, vol. 31(C).

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