A non-parametric structural hybrid modeling approach for electricity prices

Moazeni, S, Coulon, M, Arciniegas Rueda, I, Song, B and Powell, W B (2016) A non-parametric structural hybrid modeling approach for electricity prices. Quantitative Finance, 16 (2). pp. 213-230. ISSN 1469-7688

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Abstract

We develop a stochastic model of zonal/regional electricity prices, designed to reflect information in fuel forward curves and aggregated capacity and load as well as zonal or regional price spreads. We use a nonparametric model of the supply stack that captures heat rates and fuel prices for all generators in the market operator territory, combined with an adjustment term to approximate congestion and other zone-specific behavior. The approach requires minimal calibration effort, is readily adaptable to changing market conditions and regulations, and retains sufficient tractability for the purpose of forward price calibration. The model is illustrated for the spot and forward electricity prices of the PS zone in the PJM market, and the set of time-dependent risk premiums are inferred and analyzed.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences > GE170 Environmental policy
H Social Sciences > HB Economic theory. Demography > HB0131 Methodology > HB0135 Mathematical economics. Quantitative methods Including econometrics, input-output analysis, game theory
H Social Sciences > HC Economic history and conditions > HC0079 Special topics, A-Z > HC0079.E5 Environmental policy and economic development. Sustainable development Including environmental economics
H Social Sciences > HG Finance
T Technology > T Technology (General) > T0055.4 Industrial engineering. Management engineering > T0057 Applied mathematics. Quantitative methods
T Technology > TJ Mechanical engineering and machinery > TJ0807 Renewable energy sources
Depositing User: Michael Coulon
Date Deposited: 13 Jul 2015 10:43
Last Modified: 02 Aug 2017 05:33
URI: http://sro.sussex.ac.uk/id/eprint/55301

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