Stochastic behaviour of the electricity bid stack: from fundamental drivers to power price

Coulon, Michael and Howison, Sam (2009) Stochastic behaviour of the electricity bid stack: from fundamental drivers to power price. Journal of Energy Markets, 2 (1). pp. 29-69. ISSN 1756-3607

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Abstract

We develop a fundamental model for spot electricity prices, based on stochastic processes for underlying factors (fuel prices, power demand and generation capacity availability), as well as a parametric form for the bid stack function which maps these price drivers to the power price. Using observed bid data, we find high correlations between the movements of bids and the corresponding fuel prices. We fit the model to the PJM and New England markets in the US, anddiscuss its performance, in terms of capturing key properties of simulated price trajectories, as well as comparing implied forward prices with observed data.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HD Industries. Land use. Labour > HD9000 Special industries and trades > HD9502 Energy industries. Energy policy. Fuel trade
H Social Sciences > HG Finance
Q Science > QA Mathematics > QA0273 Probabilities. Mathematical statistics
T Technology > T Technology (General) > T0055.4 Industrial engineering. Management engineering > T0057 Applied mathematics. Quantitative methods
Depositing User: Michael Coulon
Date Deposited: 19 Jul 2013 08:32
Last Modified: 22 Mar 2017 03:34
URI: http://sro.sussex.ac.uk/id/eprint/45719

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