Modelling Spot Prices in Deregulated Wholesale Electricity Markets: A Selected Empirical Review
Queensland University of Technology - School of Economics and Finance
Andrew C. Worthington
Griffith University; Financial Research Network (FIRN)
October 28, 2008
The restructuring and deregulation of global electricity markets has brought about fundamental changes in the behaviour of wholesale spot prices. In turn, this has fostered a small but increasing volume of literature aimed at modelling and providing best-practice forecasts of electricity prices and price volatility, often employing very high-frequency data. The purpose of this article is to review the various time-series regression modelling approaches as they apply to competitive electricity markets throughout the world. Apart from discussing the strengths and weaknesses of the different approaches, the paper also examines the steps faced by researchers as they progressively move through the modelling process. The key findings of the studies are also discussed. Accordingly, the article provides guidance to those conducting empirical research on electricity prices and also as an aid for policymakers, managers and practitioners interpreting research outcomes.
Number of Pages in PDF File: 29
Keywords: wholesale electricity prices, high-frequency data, price volatility
JEL Classification: C22, C51working papers series
Date posted: October 29, 2008
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