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

journal contribution
posted on 2023-06-08, 15:24 authored by Michael Coulon, Sam Howison
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.

History

Publication status

  • Published

Journal

Journal of Energy Markets

ISSN

1756-3607

Publisher

Incisive Media Ltd.

Issue

1

Volume

2

Page range

29-69

Department affiliated with

  • Business and Management Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2013-07-19

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