A GARCH Model to Understand the Volatility of the Electricity Spot Price in Brazil

André Luis da Silva Leite and Marcus Vinicius Andrade de Lima
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André Luis da Silva Leite: Federal University of Santa Catarina, Brazil.
Marcus Vinicius Andrade de Lima: Federal University of Santa Catarina, Brazil.

International Journal of Energy Economics and Policy, 2023, vol. 13, issue 5, 332-338

Abstract: Electricity is sensitive to extreme price events and spot price volatility is an inherent characteristic of competitive electricity markets. The purpose of this article it to model the realized volatility of electricity spot price in Brazil. The Brazilian electricity industry presents unique characteristics and because of this price varies a lot in a short period. So, we developed a GARCH model using 862 weekly observations to understand the realized volatility in the four different market. We conclude that the spot price in Brazil presents high volatility that presents risk to agents. This high volatility is associated with institutional factors and the increase in the share of renewable energy in the electricity mix.

Keywords: Volatility; GARCH Model; Spot Price; Brazilian Electricity Market (search for similar items in EconPapers)
JEL-codes: C32 Q40 Q41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2023-05-38

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