Determinants of the wholesale prices of energy and ancillary services in the U.S. Midcontinent electricity market

Jay Zarnikau (), C.H. Tsai and C.K. Woo

Energy, 2020, vol. 195, issue C

Abstract: This paper examines wholesale price behavior of energy and ancillary services (AS) in the day-ahead market (DAM) and real-time market (RTM) of the Midcontinent Independent System Operator (MISO), the second largest regional transmission organization in the U.S. Using hourly data for the period of 12/19/2013 to 12/30/2017, it estimates a system of 16 electricity price regressions that recognizes the interdependence of MISO’s electricity products. Its key findings are: (1) MISO’s regional DAM energy prices increase with the day-ahead forecasts of natural gas price and MISO’s regional loads, PJM’s DAM energy price at its MISO interface, and MISO’s DAM AS requirements; (2) MISO’s regional DAM energy prices decline with DAM schedules for nuclear and wind generation; (3) MISO’s regional RTM energy prices increase with, but diverge from, MISO’s regional DAM energy prices; (4) MISO’s system-average DAM AS prices increase with MISO’s system-average DAM energy price and procured amounts of AS; and (5) MISO’s system-average RTM AS prices increase with MISO’s system-average RTM energy price and system-average DAM AS prices. These findings imply that MISO can reduce its DAM and RTM prices for energy and AS by accelerating wind generation development, expanding demand-side-management, and easing inter-regional transmission congestion.

Keywords: Wholesale electricity prices; Day-ahead markets; Real-time markets; Efficient trading hypothesis; Merit order effect hypothesis; MISO (search for similar items in EconPapers)
JEL-codes: D44 D47 G13 G14 Q41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:195:y:2020:i:c:s0360544220301584

DOI: 10.1016/j.energy.2020.117051

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