Electricity Spot Market Prices Research Articles

The impact of wind generation on the electricity spot-market price level and variance: The Texas experience

The literature on renewable energy suggests that an increase in intermittent wind generation would reduce the spot electricity market price by displacing high fuel-cost marginal generation. Taking advantage of a large file of Texas-based 15-min data, we show that while rising wind generation does indeed tend to reduce the level of spot prices, it is also likely to enlarge the spot-price variance. The key policy implication is that increasing use of price risk management should accompany expanded deployment of wind generation.

Efficient Investment Portfolios for the Swiss Electricity Supply Sector

In this paper, we investigate existing and possible future power generation capacities in Switzerland from a risk-return perspective, using the Mean-Variance Portfolio Theory of Markowitz (1952). The study covers power generation technologies currently in operation, such as nuclear power, storage hydro power and run-of-river hydro power plants, and two new renewable energy technologies (photovoltaics and wind). Additionally, natural gas combined cycle (NGCC) technology, a possible extension to the current Swiss portfolio, is assessed. The technology-specific risks considered include electricity spot market price, production capacity and reliability, fuel cost, funding liabilities, and operation and maintenance outlays. These factors are implemented in a Net Present Value (NPV) model and Monte Carlo simulations are applied to assess each investment alternative. The lifetime-adjusted average return, together with the return-speci¯c variance, forms the basis for the portfolio optimization conducted in the second stage of the analysis. The minimum variance (or maximum return) optimization is performed separately for base-load and peak-load technology portfolios. By defining different scenarios for the upper and lower bound for each technology's share, we simulate different situations, enabling us both, to explain the risk-return profile of the current technology mix, and to make predictions for future portfolios. Our NPV calculations are in line with currently observed returns and, by imposing some reasonable restrictions, the model performs sufficiently well in terms of explaining past portfolio compositions. Moreover, our predicted optimal outcome matches quite nicely with the debated options for enlarging power production in Switzerland.

EU-ETS and Nordic Electricity: A CVAR Analysis

A cointegrated vector autoregressive (CVAR) model is estimated to determine the dynamic relationship between Nordic wholesale electricity prices and EU emissions trading scheme (EU-ETS) CO2 allowance prices. An impulse response analysis reveals that electricity prices have large short-term responses to CO2 price shocks, but that this response dampens over time. Using hourly Nordic electricity spot market prices, I find that the value of short-term response of electricity prices to a shock in CO2 prices in off-peak hours is consistent with expected values for near complete pass-through of CO2 emission costs when coal-generated power is at the margin. Likewise, the estimates reveal that peak hour electricity price responses to CO2 price shocks are as expected for a market that has near complete pass-through of CO2 emission costs when natural gas-generated power is at the margin. These results further suggest the Nordic electricity market is pricing as a competitive market.

EU-ETS and Nordic Electricity: A CVAR Approach

A cointegrated vector autoregressive (CVAR) model is estimated to determine the dynamic relationship between Nordic wholesale electricity prices and EU emissions trading scheme (EU-ETS) CO2 allowance prices. An impulse response analysis reveals that electricity prices have large short-term responses to CO2 price shocks, but that this response dampens over time. Using hourly Nordic electricity spot market prices, I find that the value of short-term response of electricity prices to a shock in CO2 prices in off-peak hours is consistent with expected values for near complete pass-through of CO2 emission costs when coal-generated power is at the margin. Likewise, the estimates reveal that peak hour electricity price responses to CO2 price shocks are as expected for a market that has near complete passthrough of CO2 emission costs when natural gas-generated power is at the margin. These results further suggest the Nordic electricity market is pricing as a competitive market.

Modelling and evaluation of interruptible-load programmes in electricity markets

Achieving higher system reliability using market-based approaches is a contemporary issue that has been attracting a great deal of attention in the emerging deregulated electricity-market structure. The paper presents a methodology for the modelling and evaluation of interruptible-load programmes to tackle this issue. The interruptible-load programme is formulated as an equivalent price-based generating resource with a random outage effect, and is thus incorporated in a probabilistic production simulation of a system. The interdependence between the electricity spot-market price and the equivalent generating-resource parameters is addressed and solved by an iterative co-ordinating algorithm. The proposed approach is capable of achieving comprehensive evaluations and systematic decision making for the interruptible load programme in electricity-market operation. A numerical-case-study example is presented to illustrate the validity of the method. The results reveal that interruptible-load programmes can serve effectively as a market-based tool to achieve a proper balance between generation-capacity reliability and economics in the competitive electricity markets.

05/00174 On the correlation of electricity spot market prices and photovoltaic electricity generation: Meyer, T. and Luther, J. Energy Conversion and Management, 2004, 45, (17), 2639–2644

05/00174 On the correlation of electricity spot market prices and photovoltaic electricity generation: Meyer, T. and Luther, J. Energy Conversion and Management, 2004, 45, (17), 2639–2644

On the correlation of electricity spot market prices and photovoltaic electricity generation

Discussions about market introduction of grid connected photovoltaics (PV) and its costs usually concentrate only on the gross energy produced without taking the time dependency of electricity prices and, thus, the time dependency of the value of PV electricity into account. To make a first approximation of what the effect of the time variance of electricity cost on the value of PV electricity is, the correlation with spot market prices is analysed in this paper. PV is not dispatchable by nature, but is relatively well predictable in the range of one day, if the average of spatially dispersed systems is considered. Thus, this correlation gives a good indication for the additional value of PV electricity.