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Hourly Electricity Prices in Day-ahead MarketsRonald HuismanErasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) C. HuurmanErasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) Ronald MahieuTilburg University - Center for Economic Research, Econometrics and Finance Group; Eindhoven University of Technology (TUE) - Department of Industrial Engineering and Innovation Sciences June 2006 Abstract: This paper focuses on the characteristics of hourly electricity prices in day-ahead markets. In these markets, quotes for day-ahead delivery of electricity are submitted simultaneously for all hours in the next day. The same information set is used for quoting all hours of the day. The dynamics of hourly electricity prices does not behave as a time series process. Instead, these prices should be treated as a panel in which the prices of 24 cross-sectional hours vary from day to day. This paper introduces a panel model for hourly electricity prices in day-ahead markets and examines their characteristics. The results show that hourly electricity prices exhibit hourly specific mean-reversion and that they oscillate around an hourly specific mean price level. Furthermore, a block structured cross-sectional correlation pattern between the hours is apparent.
Number of Pages in PDF File: 13 Keywords: energy markets, day-ahead electricity electricity prices, panel models JEL Classification: C23, D40, G10, H41 working papers seriesDate posted: July 21, 2006Suggested CitationContact Information
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