Marginal Fuel Switching and Price Volatility in PJM

36 Pages Posted: 10 Feb 2019

See all articles by Alessio Saretto

Alessio Saretto

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Anastasia Shcherbakova

Texas A&M University - Department of Agricultural Economics

Jeremy Lin

Transmission Analytics

Date Written: January 28, 2019

Abstract

We use emergency outages of coal and gas generators in PJM as an exogenous source of variation in the power generation stack to study how changes in the marginal fuel source affect real-time wholesale electricity prices. Our results cast significant doubt on anecdotal evidence that natural gas generation leads to higher electricity price volatility. We find that wholesale prices are less volatile when natural gas is on the margin more often.

Keywords: Price Volatility, Natural Gas, Coal, Emergency Outages

JEL Classification: G1, G13, Q02, Q41

Suggested Citation

Saretto, Alessio and Shcherbakova, Anastasia and Lin, Jeremy, Marginal Fuel Switching and Price Volatility in PJM (January 28, 2019). Available at SSRN: https://ssrn.com/abstract=3324592 or http://dx.doi.org/10.2139/ssrn.3324592

Alessio Saretto (Contact Author)

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

800 Campbell Road
SM 31
Richardson, TX 75080
United States
972-883-5907 (Phone)

HOME PAGE: http://www.utdallas.edu/~axs125732

Anastasia Shcherbakova

Texas A&M University - Department of Agricultural Economics ( email )

College Station, TX 77843
United States

HOME PAGE: http://energy.tamu.edu/faculty-experts/anastasia-shcherbakova/

Jeremy Lin

Transmission Analytics

Austin, TX
United States

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