Search results

1 – 10 of over 8000
To view the access options for this content please click here
Article
Publication date: 14 June 2021

Waldemar de Souza, Carlos Heitor Campani, Martin Bohl, Rafael Palazzi and Felipe de Oliveira

This study aims to formulate a mechanism design in the derivatives market, summarizing a framework to set up the Brazilian electricity futures market.

Abstract

Purpose

This study aims to formulate a mechanism design in the derivatives market, summarizing a framework to set up the Brazilian electricity futures market.

Design/methodology/approach

This exploratory study formulates a mechanism design in the derivatives market, summarizing a framework to set up the Brazilian electricity futures market.

Findings

The results show a positive economic outcome for the creation of the Brazilian futures electricity market.

Originality/value

The main feature in this work is to summarize a framework to set up the Brazilian electricity futures market applying mechanism design, applicable in other countries. The features of the mechanism are the space of expected results (Z), the strategies to survey the environmental space (θ) and the mechanism design – messages space (M).

Details

International Journal of Energy Sector Management, vol. 15 no. 5
Type: Research Article
ISSN: 1750-6220

Keywords

To view the access options for this content please click here
Book part
Publication date: 27 August 2014

Kevin Jones

This chapter focuses on the common occurrence of wholesale electricity prices that fall below the cost of production. This “negative pricing” in effect represents payment…

Abstract

This chapter focuses on the common occurrence of wholesale electricity prices that fall below the cost of production. This “negative pricing” in effect represents payment to high-volume consumers for taking excess power off the grid, thus relieving overload. Occurrences of negative pricing have been observed since the wholesale electricity markets have been operating, and occur during periods of low demand, while generators are being kept in reserve for rapid engagement when demand increases (it is expensive and time-consuming to shut down generators and then restart them, so they are often kept in “spooling mode”). In such situations power production may temporarily exceed demand, potentially overloading the system. When the federal government began subsidizing the construction of wind generation projects, with regulations in place requiring transmission grids to accept all of the electricity produced by the wind generators, negative pricing became more frequent.

Details

Research in Finance
Type: Book
ISBN: 978-1-78190-759-7

To view the access options for this content please click here
Book part
Publication date: 1 May 2012

Kevin Jones

Midwest Independent Transmission System Operator, Inc. (MISO) is a nonprofit regional transmission organization (RTO) that oversees electricity production and transmission…

Abstract

Midwest Independent Transmission System Operator, Inc. (MISO) is a nonprofit regional transmission organization (RTO) that oversees electricity production and transmission across 13 states and 1 Canadian province. MISO also operates an electronic exchange for buying and selling electricity for each of its five regional hubs.

MISO oversees two types of markets. The forward market, which is referred to as the day-ahead (DA) market, allows market participants to place demand bids and supply offers on electricity to be delivered at a specified hour the following day. The equilibrium price, known as the locational marginal price (LMP), is determined by MISO after receiving sale offers and purchase bids from market participants. MISO also coordinates a spot market, which is known as the real-time (RT) market. Traders in the RT market must submit bids and offers by 30minutes prior to the hour for which the trade will be executed. After receiving purchase and sale offers for a given hour in the RT market, MISO then determines the LMP for that particular hour.

The existence of the DA and RT markets allows producers and retailers to hedge against the large fluctuations that are common in electricity prices. Hedge ratios on the MISO exchange are estimated using various techniques. No hedge ratio technique examined consistently outperforms the unhedged portfolio in terms of variance reduction. Consequently, none of the hedge ratio methods in this study meet the general interpretation of FASB guidelines for a highly effective hedge.

Details

Research in Finance
Type: Book
ISBN: 978-1-78052-752-9

Content available
Article
Publication date: 30 November 2004

Shi Yong Yoo

This paper is concerned with the effects of weather uncertainty on the electricity future curve. Following the approach used by Lucia and Schwartz (2002), the behavior of…

Abstract

This paper is concerned with the effects of weather uncertainty on the electricity future curve. Following the approach used by Lucia and Schwartz (2002), the behavior of the underlying spot price is assumed to consist of two components ‘ a totally predictable deterministic component that accounts for regularities in the evolution of prices and a stochastic component that accounts for the behavior of residuals from the deterministic part. The weather uncertainty is modeled consistently with seasonal outlook probabilities from the CPC (Climate Prediction Center) outlook. For a given realization of temperature, the electricity load can be predicted very accurately by a time series model using temperature and other explanatory variables. Furthermore, if temperature and electricity load are known, the spot price can be predicted as well using the regime switching model with time-varying transition probabilities. The electricity future price can be calculated for the given seasonal probabilities from the CPC outlook. Then the electricity future price can be obtained as the arithmetic average of the one-day electricity future price. The future price reflects clearly the response of the spot price to different weather patterns. As the summer gets warmer, the high price regime is more likely to be realized, and as a result, the future price increases.

To view the access options for this content please click here
Article
Publication date: 17 January 2019

Dorcas Gonese, Dumisani Hompashe and Kin Sibanda

The purpose of this paper is to examine the impact of electricity prices on sectoral output in South Africa from 1994 to 2015 and also econometrically examine the impact…

Abstract

Purpose

The purpose of this paper is to examine the impact of electricity prices on sectoral output in South Africa from 1994 to 2015 and also econometrically examine the impact of electricity prices on output at sectoral levels over the same period. The paper also put forth a policy proposal that brings together electricity end-users, suppliers and government regulators with the goal of conveying an effective outcome that withstands output growth without necessarily compromising social and developmental objectives.

Design/methodology/approach

Local sources of data were utilised in applying panel data analysis. The paper utilised the data from South Africa Reserve Bank and Quantec South Africa. The Hausman test indicated that the fixed effect estimator is the appropriate estimator for this paper. Robust estimators (such as Driscoll Kraay (SCC), feasible generalised least of squares, least square dummy variables and seemingly unrelated regression (SUR) were employed for consistent and efficient inferences. The study also utilised the SUR regression to analyse the impact of electricity prices on output at a sectoral level.

Findings

The fixed effect estimator results of this paper indicate that electricity prices have a negative impact on sectoral output. Again, the SUR estimator shows that the sectoral output disparately responds to electricity prices change in South Africa over the period 1994–2015.Thus, six out of eight sectors significantly and negatively respond to electricity prices change in South Africa. The mining and the construction sectors seem not to be affected by electricity prices changes unlike agriculture, manufacturing, government services, transport and communication finance and trade.

Research limitations/implications

Although the research has attained its aims, there were some inevitable limitations. For instance, unlike the time series and cross-sectional data, the panel data were tardily assembled, since the researchers had to gather data for specific variables for each and every selected individual sector. However, this did not compromise the research findings since the panel data from both developed and developing countries are available from sources such as Easy data Quantec.

Practical implications

The results of the study show that electricity price is a limiting factor to the sectoral production growth in South Africa. Therefore, any conservation policies regarding energy or electricity should be implemented with caution. Indeed, the government should implement policies that increase energy and electricity supply in the country. Thus, the government should set affordable prices of electricity that benefits both the power and economic sector output. In addition, the electricity regulators should set prices that do not damage output across economic sectors in South Africa. Again, the government should continue supporting the imposition of subsidies on the economic sectors that are more sensitive to electricity price. To this end, the study provides a policy proposal (in line with the South African National Development Plan and the climatic change strategies) that connects electricity producers, government electricity regulators, consumers and the society with the goal of conveying an effective outcome that withstands output growth without necessarily compromising social and developmental objectives.

Social implications

Cost-reflective electricity prices may be a burden to end users but this will assist in the maintenance and expansion of the power industry to get rid of electricity supply and demand imbalances which may escalate electricity prices in future. Indeed, the electricity end users including the society should pay a price that improves generation capacity to avoid power shortages since the lack of energy (electricity) contributes to poverty and deprivation and can contribute to economic decline. In this regard, the government should work hard to reduce the public resistance towards the cost-reflective electricity prices strategy; there is a need to keep the electricity end users informed on the economic impacts of such strategies in order for them to make informed choices.

Originality/value

This paper utilised the panel data for sectoral analysis. Again, the study aimed to provide policymakers with more information on the behaviour of different sectors with regards to electricity price changes, and hence assisting regulators and policymakers in future decisions on electricity price changes in relation to output at sectoral levels. Better knowledge of the link between electricity prices and the real sector output should permit better regulatory decisions to facilitate economic efficiency. Furthermore, it helps the government to identify sectors in need of power subsidies to enhance economic development.

Details

African Journal of Economic and Management Studies, vol. 10 no. 2
Type: Research Article
ISSN: 2040-0705

Keywords

To view the access options for this content please click here
Article
Publication date: 14 August 2021

Carlos Francisco Alves and Pedro Diogo Pinto

The ex-post literature, which evaluates the real impact of renewable generation, is scarce. Most studies are simulations and therefore are not based on real data. This…

Abstract

Purpose

The ex-post literature, which evaluates the real impact of renewable generation, is scarce. Most studies are simulations and therefore are not based on real data. This study aims to further this goal using a unique database of the Portuguese spot market, where there are powerful incentives for renewable electricity.

Design/methodology/approach

This paper analyses ex-post the impact of energy produced in special regime on the wholesale hourly spot market prices of Portuguese electricity during the period 2009–2016. This paper uses standard, two stage least squares and generalized method of moments multivariate regressions and other energy econometrics techniques.

Findings

It is found that special regime generation has a negative impact on the wholesale price. This impact is higher than that found in other markets. This paper also concludes that using special regime generation to supply the future growth of demand will decrease wholesale electricity spot prices more intensively than using other technologies.

Originality/value

This paper uses a unique database based on ex-post for the Portuguese spot market. The Portuguese case is particularly interesting, not only because of its strong incentives policy on renewable energy but also because its spot market is interconnected with the Spanish market. This paper contributes to the debate about the sustainability of current renewable electricity support schemes. The decreasing trend in electricity prices, with the introduction of new renewable capacity, can be incompatible with the required payments for non-renewable producers. This paper also shows that even if the price reduction on spot markets is transferred to final consumers, given that it is relatively small (8% spot price which represents 45% of the final price), compared with the cost of incentives (35% of the final price), consumers probably will not be able to support a new investment pipeline with a similar framework.

Details

International Journal of Energy Sector Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1750-6220

Keywords

To view the access options for this content please click here
Article
Publication date: 25 September 2020

Christof Naumzik and Stefan Feuerriegel

Trading on electricity markets occurs such that the price settlement takes place before delivery, often day-ahead. In practice, these prices are highly volatile as they…

Abstract

Purpose

Trading on electricity markets occurs such that the price settlement takes place before delivery, often day-ahead. In practice, these prices are highly volatile as they largely depend upon a range of variables such as electricity demand and the feed-in from renewable energy sources. Hence, the purpose of this paper is to provide accurate forecasts..

Design/methodology/approach

This paper aims at comparing different predictors stemming from supply-side (solar and wind power generation), demand-side, fuel-related and economic influences. For this reason, this paper implements a broad range of non-linear models from machine learning and draw upon the information-fusion-based sensitivity analysis.

Findings

This study disentangles the respective relevance of each predictor. This study shows that external predictors altogether decrease root mean squared errors by up to 21.96%. A Diebold-Mariano test statistically proves that the forecasting accuracy of the proposed machine learning models is superior.

Research limitations/implications

The performance gain from including more predictors might be larger than from a better model. Future research should place attention on expanding the data basis in electricity price forecasting.

Practical implications

When developing pricing models, practitioners can achieve reasonable performance with a simple model (e.g. seasonal-autoregressive moving-average) that is built upon a wide range of predictors.

Originality/value

The benefit of adding further predictors has only recently received traction; however, little is known about how the individual variables contribute to improving forecasts in machine learning.

Details

International Journal of Energy Sector Management, vol. 15 no. 1
Type: Research Article
ISSN: 1750-6220

Keywords

To view the access options for this content please click here
Book part
Publication date: 19 March 2018

Kevin Jones

This chapter examines the efficiency of the Midcontinent Independent System Operator (MISO), Inc., electricity exchange following its major expansion in terms of market…

Abstract

This chapter examines the efficiency of the Midcontinent Independent System Operator (MISO), Inc., electricity exchange following its major expansion in terms of market participants and geographic scope in 2014. Specifically, hourly day-ahead (forward) and real-time (spot) prices from 2014 to 2016 reveal that forward premiums are prevalent despite the increase in market size. Furthermore, these forward premiums do not adhere to Bessembinder and Lemmon’s (2002) commonly used general equilibrium model for electricity forward premia. A technical trading rule based on the relationship between day-ahead prices across hubs that was found to be profitable prior to MISO’s expansion still produces economically and statistically significant returns after the exchange’s growth.

To view the access options for this content please click here
Article
Publication date: 4 March 2019

Bruno Bernal, Juan Carlos Molero and Fernando Perez De Gracia

The purpose of this paper is to examine the impact of fossil fuel prices – crude oil, natural gas and coal – on different electricity prices in Mexico. The use of…

Abstract

Purpose

The purpose of this paper is to examine the impact of fossil fuel prices – crude oil, natural gas and coal – on different electricity prices in Mexico. The use of alternative variables for electricity price helps to increase the robustness of the analysis in comparison to previous empirical studies.

Design/methodology/approach

The authors use an unrestricted vector autoregressive model and the sample covers the period January 2006 to January 2016.

Findings

Empirical findings suggest that crude oil, natural gas and coal prices have a significant positive impact on electricity prices – domestic electricity rates – in Mexico in the short run. Furthermore, crude oil and natural gas prices have also a significant positive impact on electricity prices – commercial and industrial electricity rates.

Originality/value

Two are the main contributions. First, this paper explores the nexus among crude oil, natural gas, coal and electricity prices in Mexico, while previous studies focus on the US, UK and some European economies. Second, instead of using one electricity price as a reference of national or domestic electricity sector, the analysis considers alternative Mexican electricity prices.

Details

Journal of Economic Studies, vol. 46 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

To view the access options for this content please click here
Article
Publication date: 5 September 2016

Åsa Grytli Tveten, Jon Gustav Kirkerud and Torjus Folsland Bolkesjø

This study aims to investigate the effects of thermal–hydro interconnection on the revenues, market value and curtailment of variable renewable energy (VRE). The…

Abstract

Purpose

This study aims to investigate the effects of thermal–hydro interconnection on the revenues, market value and curtailment of variable renewable energy (VRE). The increasing market shares of VRE sources in the Northern European power system cause declining revenues for VRE producers, because of the merit-order effect. A sparsely studied flexibility measure for mitigating the drop in the VRE market value is increased interconnection between thermal- and hydropower-dominated regions.

Design/methodology/approach

A comprehensive partial equilibrium model with a high spatial and temporal resolution is applied for the analysis.

Findings

Model simulation results for 2030 show that thermal–hydro interconnection will cause exchange patterns that to a larger extent follow VRE production patterns, causing significantly reduced VRE curtailment. Wind value factors are found to decrease in the hydropower-dominated regions and increase in thermal power-dominated regions. Because of increased average electricity prices in most regions, the revenues are, however, found to increase for all VRE technologies. By only assuming the planned increases in transmission capacity, total VRE revenues are found to increase by 3.3 per cent and VRE electricity generation increases by 3.7 TWh.

Originality/value

The current study is, to the authors' knowledge, the first to analyze the effect of interconnection between thermal- and hydropower-dominated regions on the VRE market value, and the authors conclude that this is a promising flexibility measure for mitigating the value-drop of VRE caused by the merit-order effect. The study results demonstrate the importance of taking the whole power system into consideration when planning future transmission capacity expansions.

Details

International Journal of Energy Sector Management, vol. 10 no. 3
Type: Research Article
ISSN: 1750-6220

Keywords

1 – 10 of over 8000