Abstract
In this paper, we propose a novel approach for clustering time series, which combines three well-known aspects: a permutation-based coding of the time series, several distance measurements for discrete distributions and hierarchical clustering using different linkages. The proposed method classifies a set of time series into homogeneous groups, according to the degree of dependency among them. That is, time series with a high level of dependency will lie in the same cluster. Moreover, taking into account the nature of the codifying process, the method allows us to detect linear and nonlinear dependences. To illustrate the procedure, a set of fourteen electricity price series coming from different wholesale electricity markets worldwide was analyzed. We show that the classification results are consistent with the characteristics of the electricity markets in the study and with their degree of integration. Besides, we outline the necessity of removing the seasonal component of the price series before the analysis and the capability of the method to detect changes in the dependence level along time.
Highlights
IntroductionThe European Union is developing the process of electricity market integration, which means for the Union the possibility to allocate new generation resources better, to allow the integration of more renewable sources in the power mix and to reduce the annual costs of the markets, mainly for the customer
There is a huge amount of literature dealing with the analysis of price series in energy markets, in particular focused on the study of dependencies among different electricity markets.For example, the European Union is developing the process of electricity market integration, which means for the Union the possibility to allocate new generation resources better, to allow the integration of more renewable sources in the power mix and to reduce the annual costs of the markets, mainly for the customer
The whole time series has been divided into non-overlapping blocks of size w, and given an embedding dimension m, the distance measures proposed in this paper are computed for each block
Summary
The European Union is developing the process of electricity market integration, which means for the Union the possibility to allocate new generation resources better, to allow the integration of more renewable sources in the power mix and to reduce the annual costs of the markets, mainly for the customer These objectives need the development of several indicators based on prices, such as the ones presented in this work, and others, such as cross-border power flows or the integration of non-energy markets (balances, capacity) to analyze the degree of integration of present markets, physical constraints and their interest and potential for the integration in the future. The European Parliament (2015) showed [1] that in a coupled market, less generation capacity is required, and the annual costs avoided were estimated at 1.2 billion euros (capital costs) and 448 million euro (fixed operational costs) for electricity and gas markets
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