Modelling Electricity Prices: International Evidence* |
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Authors: | Alvaro Escribano J. Ignacio Peña Pablo Villaplana |
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Affiliation: | 1. Department of Economics, Universidad Carlos III de Madrid, 28903 Getafe, Madrid, Spain (e‐mail: alvaroe@eco.uc3m.es);2. Department of Business Administration, Universidad Carlos III de Madrid, 28903 Getafe, Madrid, Spain (e‐mail: vpenya@eco.uc3m.es);3. Comisión Nacional de Energía, C/Alcalá, 47, 28014 Madrid, Spain (e‐mail: pvc@cne.es) |
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Abstract: | This article analyses the evolution of electricity prices in deregulated markets. We present a general class of models that simultaneously takes into account several factors: seasonality, mean reversion, GARCH behaviour and time‐dependent jumps. The models are applied to daily equilibrium spot prices of eight electricity markets. Eight different nested models were estimated to compare the relative importance of each factor in each of the eight markets. We find strong evidence that electricity equilibrium prices are mean‐reverting, with volatility clustering (GARCH) and with jumps of time‐dependent intensity, even after adjusting for seasonality. |
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Keywords: | C22 L9 L94 G10 |
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