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Estimating the Volatility of Wholesale Electricity Spot Prices in the US

Lester Hadsell, Achla Marathe and Hany A. Shawky

Year: 2004
Volume: Volume 25
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No4-2
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Abstract:
This paper examines the volatility of wholesale electricity prices for five US markets. Using data covering the period from May 1996 to September 2001, for the California-Oregon Border, Palo Verde, Cinergy, Entergy, and Pennsylvania-New Jersey-Maryland markets, we examine the volatility of electricity wholesale prices over time and across markets. We estimate volatility using a TARCH model to study the differences among markets and the seasonal characteristics of each market. For all markets, we find strong evidence for a downward trend in the ARCH term and a significant negative asymmetric effect over the sample period. We also document important differences among the regional electricity markets not only with respect to wholesale price volatility and seasonal variations, but also with respect to asymmetric properties and persistence of volatility.



Electricity Price Volatility and the Marginal Cost of Congestion: An Empirical Study of Peak Hours on the NYISO Market, 2001-2004

Lester Hadsell and Hany A. Shawky

Year: 2006
Volume: Volume 27
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No2-9
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Abstract:
We examine the volatility characteristics of the NYISO Day Ahead and Real Time electricity markets for peak hours from January 2001 to June 2004. GARCH models are used to study the differences in volatility across zones. We find that price volatility is higher but less persistent in the Real Time market than in the Day Ahead market. Furthermore, we document the importance of transmission congestion and empirically estimate its impact on volatility in electricity prices. We also examine the Day Ahead premium and show how it is related to volatility in Real Time prices. The implications for participants in these markets are discussed.





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