Hourly Electricity Prices in Day-ahead Markets

13 Pages Posted: 21 Jul 2006  

Ronald Huisman

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

C. Huurman

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Ronald Mahieu

Tilburg University - Center for Economic Research, Econometrics and Finance Group; TiasNimbas Business School

Multiple version iconThere are 2 versions of this paper

Date Written: 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.

Keywords: energy markets, day-ahead electricity electricity prices, panel models

JEL Classification: C23, D40, G10, H41

Suggested Citation

Huisman, Ronald and Huurman, C. and Mahieu, Ronald, Hourly Electricity Prices in Day-ahead Markets (June 2006). Available at SSRN: https://ssrn.com/abstract=918050 or http://dx.doi.org/10.2139/ssrn.918050

Ronald Huisman (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Christian Huurman

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Ronald J. Mahieu

Tilburg University - Center for Economic Research, Econometrics and Finance Group ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2430 (Phone)
+31 13 466 3280 (Fax)

HOME PAGE: http://center.uvt.nl/staff/mahieu/

TiasNimbas Business School ( email )

Warandelaan 2
Tilburg, North-Brabant 5071HS
Netherlands

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