Modelling electricity prices: international evidence Articles uri icon

publication date

  • April 2012

start page

  • 622

end page

  • 650

issue

  • 5

volume

  • 73

international standard serial number (ISSN)

  • 0305-9049

electronic international standard serial number (EISSN)

  • 1468-0084

abstract

  • This article analyses the evolution of electricity prices in deregulated markets. We present a general class of models that simultaneously takes into account several factors: seasonality, mean reversion, GARCH behaviour and time-dependent jumps. The models are applied to daily equilibrium spot prices of eight electricity markets. Eight different nested models were estimated to compare the relative importance of each factor in each of the eight markets. We find strong evidence that electricity equilibrium prices are mean-reverting, with volatility clustering (GARCH) and with jumps of time-dependent intensity, even after adjusting for seasonality