Electricity markets around the world

Klaus Mayer, Stefan Trück

Research output: Contribution to journalReview articleResearchpeer-review

Abstract

We examine wholesale electricity spot prices around the world. Based on a comprehensive dataset of intraday prices for 28 market regions in 19 countries, we compare the markets with regards to price variation and market structure. In particular, seasonal patterns, volatility, and the occurrence of price spikes are examined and compared with respect to determinants such as market design and production characteristics. We find that regional electricity markets in Australia are characterized by relatively low levels of annual, weekly and intra-daily seasonal patterns, but are by far the most volatile markets in this study. We also conduct a principal component analysis (PCA) based on the identified market characteristics to further investigate the differences between the considered markets. Our results illustrate that more than 80% of the variance in the data can be explained by three principal components, that, based on their loadings can be interpreted as a dispersion factor, a weekly and intra-daily seasonality factor and a factor related to price levels. We also find that electricity markets organized as day-ahead markets exhibit a significantly lower overall price variation compared to markets with real-time trading. These differences exist in a cross-market observation, as well as for markets that feature both trading schemes. Our results provide important information for market participants by classifying the considered markets with respect to associated price and volatility risks.

LanguageEnglish
Pages77-100
Number of pages24
JournalJournal of Commodity Markets
Volume9
DOIs
Publication statusPublished - 1 Mar 2018

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Electricity market
Factors
Principal components
Market structure
Volatility risk
Seasonality
Market design
Market characteristics
Principal component analysis
Electricity
Price level
Spot price
Price risk

Keywords

  • energy markets
  • market design
  • power prices
  • volatility

Cite this

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title = "Electricity markets around the world",
abstract = "We examine wholesale electricity spot prices around the world. Based on a comprehensive dataset of intraday prices for 28 market regions in 19 countries, we compare the markets with regards to price variation and market structure. In particular, seasonal patterns, volatility, and the occurrence of price spikes are examined and compared with respect to determinants such as market design and production characteristics. We find that regional electricity markets in Australia are characterized by relatively low levels of annual, weekly and intra-daily seasonal patterns, but are by far the most volatile markets in this study. We also conduct a principal component analysis (PCA) based on the identified market characteristics to further investigate the differences between the considered markets. Our results illustrate that more than 80{\%} of the variance in the data can be explained by three principal components, that, based on their loadings can be interpreted as a dispersion factor, a weekly and intra-daily seasonality factor and a factor related to price levels. We also find that electricity markets organized as day-ahead markets exhibit a significantly lower overall price variation compared to markets with real-time trading. These differences exist in a cross-market observation, as well as for markets that feature both trading schemes. Our results provide important information for market participants by classifying the considered markets with respect to associated price and volatility risks.",
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Electricity markets around the world. / Mayer, Klaus; Trück, Stefan.

In: Journal of Commodity Markets, Vol. 9, 01.03.2018, p. 77-100.

Research output: Contribution to journalReview articleResearchpeer-review

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