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Wholesale electricity price volatility and price bounds: a market comparison
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Resumo(s)
Due to high volatility and frequent price spikes in wholesale electricity market prices, market
regulators often impose price bounds on auction and final market prices. This paper applies a
model-free intraday-range measure and ARMA-EGARCH(1,1) models to wholesale electricity
price data collected from seven markets in the United States and Europe to measure and compare
volatilities across the seven markets and the effects of exogenous amendments to price bounds in
a subsample of three markets. The paper concludes that the wider a market’s imposed price
bounds, the higher the price volatility. Conclusions also suggest that exogenous price bound
changes have more significant effects in markets with tighter imposed bounds and that changes
made to locational marginal price bounds have greater effects on price behavior than do changes
made to energy offer price bounds. Conclusions add to emerging research about the effects of
price bounds on electricity price volatility and are relevant for policy makers and market
participants concerned with price volatility.
Descrição
Palavras-chave
Wholesale electricity market Price volatility Intraday range Price bounds