IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Modelling price spikes in electricity markets - the impact of load, weather and capacity

Listed author(s):
  • Rangga Handika
  • Chi Truong
  • Stefan Trueck
  • Rafal Weron

We examine the impact of explanatory variables such as load, weather and capacity constraints on the occurrence and magnitude of price spikes in regional Australian electricity markets. We apply the so-called Heckman correction, a two-stage estimation procedure that allows us to investigate the impact of the considered variables on extreme price observations only, while correcting for a selection bias due to non-random sampling in the analysis. The framework is applied to four regional electricity markets in Australia and it is found that for these markets, load, relative air temperature and reserve margins are significant variables for the occurrence of price spikes, while electricity loads and relative air temperature are significant variables to impact on the magnitude of a price spike. The Heckman selection model is also found to outperform standard OLS regression models with respect to forecasting the magnitude of electricity price spikes.

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.

File URL: http://www.im.pwr.wroc.pl/~hugo/RePEc/wuu/wpaper/HSC_14_08.pdf
File Function: Revised version
Download Restriction: no

Paper provided by Hugo Steinhaus Center, Wroclaw University of Technology in its series HSC Research Reports with number HSC/14/08.

as
in new window

Length: 28 pages
Date of creation: 16 May 2014
Publication status: Published as R. Handika, C. Truong, S. Trueck, R. Weron (2014) Modelling price spikes in electricity markets - the impact of load, weather and capacity, in "Energy Pricing Models: Recent Advances, Methods, and Tools", ed. M. Prokopczuk, Palgrave Macmillan, 195-221.
Handle: RePEc:wuu:wpaper:hsc1408
Contact details of provider: Postal:
Wybrzeze Wyspianskiego 27, 50-370 Wroclaw

Phone: +48-71-3203530
Fax: +48-71-3202654
Web page: http://prac.im.pwr.wroc.pl/~hugo
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Timothy Christensen & Stan Hurn & Kenneth Lindsay, 2009. "It Never Rains but it Pours: Modeling the Persistence of Spikes in Electricity Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-48.
  2. Weron, R & Bierbrauer, M & Trück, S, 2004. "Modeling electricity prices: jump diffusion and regime switching," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(1), pages 39-48.
  3. Anderson, Edward J. & Hu, Xinin & Winchester, Donald, 2007. "Forward contracts in electricity markets: The Australian experience," Energy Policy, Elsevier, vol. 35(5), pages 3089-3103, May.
  4. Alvaro Cartea & Marcelo Figueroa, 2005. "Pricing in Electricity Markets: A Mean Reverting Jump Diffusion Model with Seasonality," Applied Mathematical Finance, Taylor & Francis Journals, vol. 12(4), pages 313-335.
  5. Mount, Timothy D. & Ning, Yumei & Cai, Xiaobin, 2006. "Predicting price spikes in electricity markets using a regime-switching model with time-varying parameters," Energy Economics, Elsevier, vol. 28(1), pages 62-80, January.
  6. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
  7. Misiorek Adam & Trueck Stefan & Weron Rafal, 2006. "Point and Interval Forecasting of Spot Electricity Prices: Linear vs. Non-Linear Time Series Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(3), pages 1-36, September.
  8. Bierbrauer, Michael & Menn, Christian & Rachev, Svetlozar T. & Truck, Stefan, 2007. "Spot and derivative pricing in the EEX power market," Journal of Banking & Finance, Elsevier, vol. 31(11), pages 3462-3485, November.
  9. Kanamura, Takashi & Ohashi, Kazuhiko, 2007. "A structural model for electricity prices with spikes: Measurement of spike risk and optimal policies for hydropower plant operation," Energy Economics, Elsevier, vol. 29(5), pages 1010-1032, September.
  10. Dahen, Hela & Dionne, Georges, 2010. "Scaling models for the severity and frequency of external operational loss data," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1484-1496, July.
  11. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
  12. Janczura, Joanna & Weron, Rafal, 2010. "An empirical comparison of alternate regime-switching models for electricity spot prices," Energy Economics, Elsevier, vol. 32(5), pages 1059-1073, September.
  13. Ralf Becker & Stan Hurn & Vlad Pavlov, 2007. "Modelling Spikes in Electricity Prices," The Economic Record, The Economic Society of Australia, vol. 83(263), pages 371-382, December.
  14. Christensen, T.M. & Hurn, A.S. & Lindsay, K.A., 2012. "Forecasting spikes in electricity prices," International Journal of Forecasting, Elsevier, vol. 28(2), pages 400-411.
  15. Weron, Rafal, 2000. "Energy price risk management," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 285(1), pages 127-134.
  16. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wuu:wpaper:hsc1408. 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: (Rafal Weron)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.