Energy Journal. 2011, Vol. 32 Issue 2, p81-105. 25p.
Econometrics, Economics, Prices, Electricity, and Numerical analysis
Information about the spatial structure of the transmission grid is relevant to understanding and predicting electricity prices, but this information has not been incorporated into empirical models of electricity prices in the literature. We propose the use of spatial econometric panel methods, discuss their formal characteristics in the context of electricity price data, and provide an application to a panel of PJM price data. Our econometric model includes a simple representation of the transmission system, and provides information about the effect of system constraints on the extent of electricity market integration. Empirical results confirm the existence of spatial patterns in electricity prices and illustrate their impact on estimation, forecasting, and interpolation. [ABSTRACT FROM AUTHOR]
Christensen, Timothy, Hurn, Stan, and Lindsay, Kenneth
Energy Journal. 2009, Vol. 30 Issue 1, p25-48. 24p.
Price increases, Econometrics, Mathematical models, Prices, Electricity, and Poisson processes
During periods of market stress, electricity prices can rise dramatically. This paper treats these abnormal episodes or price spikes as count events and attempts to build a model of the spiking process. By contrast to the existing literature, which either ignores temporal dependence in the spiking process or attempts to model the dependence solely in terms of deterministic variables (like seasonal and day of the week effects), this paper argues that persistence in the spiking process is an important factor in building an effective model. A Poisson autoregressive framework is proposed in which price spikes occur as a result of the latent arrival and survival of system stresses. This formulation captures the salient features of the process adequately, and yields forecasts of price spikes that are superior to those obtained from naiïe models that do not account for persistence in the spiking process. [ABSTRACT FROM AUTHOR]