Deregulated Wholesale Electricity Prices in Italy: An Empirical Analysis |
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| Authors: | Bruno Paolo Bosco Lucia P Parisio Matteo M Pelagatti |
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| Institution: | (1) Department of Legal and Economic Systems, University of Milan-Bicocca, Piazza Ateneo Nuovo, 1, Building U6, Milan, 20126, Italy;(2) Department of Statistics, University of Milan-Bicocca, Piazza Ateneo Nuovo, 1, Building U7, Milan, 20126, Italy |
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| Abstract: | In this paper we analyze a time series of daily average prices in the Italian electricity market, which started to operate
as a Pool in April 2004. Our objective is to model the high degree of autocorrelation and the multiple seasonalities in electricity
prices. We use periodic time series models with GARCH disturbances and leptokurtic distributions and compare their performance
with more classical ARMA-GARCH processes. The within-year seasonal variation is modelled using the low-frequency components
of physical quantities, which are very regular throughout the sample. Our results reveal that much of the variability in the
price series is explained by the interactions between deterministic multiple seasonalities. Periodic AR-GARCH models seem
to perform quite well in mimicking the features of the stochastic part of the price process.
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| Keywords: | Electricity auctions Periodic time series Conditional heteroskedasticity Multiple seasonalities |
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