The Influence of Temperature on Spike Probability in Day-Ahead Power Prices

13 Pages Posted: 18 Jun 2007

See all articles by Ronald Huisman

Ronald Huisman

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

Date Written: June 8, 2007

Abstract

It is well known that day-ahead prices in power markets exhibit spikes. These spikes are sudden increases in the day-ahead price that occur because power production is not flexible enough to respond to demand and/or supply shocks in the short term. This paper focuses on how temperature influences the probability on a spike. The paper shows that the difference between the actual and expected temperature significantly influences the probability on a spike and that the impact of temperature on spike probability depends on the season.

Keywords: Temperature, Day-ahead power price, Power production, Spike probability

Suggested Citation

Huisman, Ronald, The Influence of Temperature on Spike Probability in Day-Ahead Power Prices (June 8, 2007). ERIM Report Series Reference No. ERS-2007-039-F&A, Available at SSRN: https://ssrn.com/abstract=992369

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

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