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Deregulated Wholesale Electricity Prices in Italy

  • Bruno Bosco
  • Lucia Parisio
  • Matteo Pelagatti

In this paper we analyze the time series of daily average prices generated in the Italian electricity market, which started to operate as a Pool in April 2004. The objective is to characterize the high degree of autocorrelation and multiple seasonalities in the electricity prices. We use periodic time series models with GARCH disturbances and leptokurtic distributions and compare their performance with more classical ARMA-GARCH processes. The within-year seasonal variation is modelled using the low frequencies components of physical quantities, which are very regular throughout the sample. Results reveal that much of the variability of the price series is explained by deterministic multiple seasonalities which interact with each other. Periodic AR-GARCH models seem to perform quite well in mimicking the features of the stochastic part of the price process.

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File URL: http://www.statistica.unimib.it/utenti/WorkingPapers/WorkingPapers/20060301.pdf
File Function: Revised version, April 2006
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Paper provided by Università degli Studi di Milano-Bicocca, Dipartimento di Statistica in its series Working Papers with number 20060301.

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Length: 25 pages
Date of creation: Mar 2006
Date of revision: Apr 2006
Handle: RePEc:mis:wpaper:20060301
Contact details of provider: Postal: Via Bicocca degli Arcimboldi 8, 20126 Milano
Web page: http://www.statistica.unimib.it

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  1. M. Angeles Carnero & Siem Jan Koopman & Marius Ooms, 2003. "Periodic Heteroskedastic RegARFIMA Models for Daily Electricity Spot Prices," Tinbergen Institute Discussion Papers 03-071/4, Tinbergen Institute.
  2. Natalia Fabra & Juan Toro, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Industrial Organization 0212001, EconWPA, revised 31 Aug 2003.
  3. Franses, Philip Hans & Paap, Richard, 2004. "Periodic Time Series Models," OUP Catalogue, Oxford University Press, number 9780199242030, March.
  4. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  5. Wilkinson, Louise & Winsen, Joseph, 2002. "What We Can Learn from a Statistical Analysis of Electricity Prices in New South Wales," The Electricity Journal, Elsevier, vol. 15(3), pages 60-69, April.
  6. Knittel, Christopher R. & Roberts, Michael R., 2005. "An empirical examination of restructured electricity prices," Energy Economics, Elsevier, vol. 27(5), pages 791-817, September.
  7. Marius Ooms & M. Angeles Carnero & Siem Jan Koopman, 2004. "Periodic Heteroskedastic RegARFIMA models for daily electricity spot prices," Econometric Society 2004 Australasian Meetings 158, Econometric Society.
  8. Huisman, Ronald & Mahieu, Ronald, 2003. "Regime jumps in electricity prices," Energy Economics, Elsevier, vol. 25(5), pages 425-434, September.
  9. de Jong, C.M. & Huisman, R., 2002. "Option Formulas for Mean-Reverting Power Prices with Spikes," ERIM Report Series Research in Management ERS-2002-96-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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