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High Frequency Export and Price Responses in the Ontario Electricity Market

Abstract:
Export responses to unanticipated price shocks can be a key contributing factor to the rapid mean reversion of electricity prices, a phenomenon often seen in electricity markets. In this paper, we use event analysis to demonstrate how hourly export transactions respond to negative supply shocks in the Ontario electricity market. Although event analysis has been used for many years in other applications, particularly finance, to our knowledge this is the first time that this technique has been applied to price response analysis in the electricity market. The analysis clearly demonstrates the sensitivity of export volume to price changes, and more generally, the responses of prices and quantities to an unexpected supply shock.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Electricity market, integration, Ontario, electricity prices, supply shocks

DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-2


Published in Volume 29, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.