In the last few years we have observed deregulation in electricity markets and an increasing interest of price dynamics has been developed especially to consider all stylized facts shown by spot prices. Only few papers, to the authors' knowledge, have considered the Italian Electricity Spot market since it has been deregulated recently. Therefore this contribution is an investigation with emphasis on prices dynamics and volatility facts taking into account extreme spiky behavior considering median and not simply mean values to correct for outliers that heavily influence the analysis. Most papers consider daily averages of spot prices as arithmetic mean of 24 hourly prices. This produces a distortion because of the existence of spikes or jumps in the price dynamics. In addition a preliminary analysis of these Italian zonal spot prices, and the resulting single national price (PUN), shows interesting features as those observed in NordPool. We aim to understand price and volatility dynamics for production planning, pricing and risk-hedging problems proposing Reg-ARFIMA models considering at the same time congestions and technologies. Hence we provide evidence that all zonal prices and standard deviations are fractionally integrated and congestion costs, as defined in [7], play an important role in both studied dynamics. Finally, we draw policy indications regarding investment strategies in new power plant generators and in reinforced grid interconnections.
Zonal price analysis of the Italian wholesale electricity market
Grossi L.
2009
Abstract
In the last few years we have observed deregulation in electricity markets and an increasing interest of price dynamics has been developed especially to consider all stylized facts shown by spot prices. Only few papers, to the authors' knowledge, have considered the Italian Electricity Spot market since it has been deregulated recently. Therefore this contribution is an investigation with emphasis on prices dynamics and volatility facts taking into account extreme spiky behavior considering median and not simply mean values to correct for outliers that heavily influence the analysis. Most papers consider daily averages of spot prices as arithmetic mean of 24 hourly prices. This produces a distortion because of the existence of spikes or jumps in the price dynamics. In addition a preliminary analysis of these Italian zonal spot prices, and the resulting single national price (PUN), shows interesting features as those observed in NordPool. We aim to understand price and volatility dynamics for production planning, pricing and risk-hedging problems proposing Reg-ARFIMA models considering at the same time congestions and technologies. Hence we provide evidence that all zonal prices and standard deviations are fractionally integrated and congestion costs, as defined in [7], play an important role in both studied dynamics. Finally, we draw policy indications regarding investment strategies in new power plant generators and in reinforced grid interconnections.
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