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Price convergence within and between the Italian electricity day-ahead and dispatching services markets

Author

Listed:
  • Massimiliano Caporin

    (University of Padova)

  • Fulvio Fontini

    (University of Padova)

  • Paolo Santucci De Magistris

    (Unviersity of Aarhus)

Abstract

In the paper we study the convergence of prices in the electricity markets, both at the day-ahead level and for the dispatching services (such as balancing and reserves). We introduce two concepts of price convergence, the convergence of zonal prices within each market (within convergence), and the converge of prices in a given zone between the two markets (between convergence). We provide an extensive analysis based on Italian data of within and between convergence. The zonal time-series of the prices are evaluated, seasonally adjusted and tested to assess their long-run properties. This evaluation induces us to focus on the behavior of the three largest and most interconnected continental zones of Italy (North, Center-North and Center-South). The fractional cointegration methodology used in the analysis shows the existence of long-run relationships among the series used in our study. This signals the existence of price convergence within markets, even though for the dispatching services market the evidence is less robust. The analysis also shows the existence of price convergence between markets in each zone, even though the evidence is more clearly affirmed for the North (the largest Italian zone), less so for the other two zones. Results are interpreted on the basis of the characteristics of the markets and the zones.

Suggested Citation

  • Massimiliano Caporin & Fulvio Fontini & Paolo Santucci De Magistris, 2017. "Price convergence within and between the Italian electricity day-ahead and dispatching services markets," "Marco Fanno" Working Papers 0215, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0215
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    More about this item

    Keywords

    zonal prices; convergence between zones; convergence within zones; fractional cointegration; long-run equilibrium.;
    All these keywords.

    JEL classification:

    • 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
    • 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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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