Causal modeling and inference for electricity markets

Egil Ferkingstad, Anders Løland and Mathilde Wilhelmsen

Energy Economics, 2011, vol. 33, issue 3, 404-412

Abstract: How does dynamic price information flow among Northern European electricity spot prices and prices of major electricity generation fuel sources? We use time series models combined with new advances in causal inference to answer these questions. Applying our methods to weekly Nordic and German electricity prices, and oil, gas and coal prices, with German wind power and Nordic water reservoir levels as exogenous variables, we estimate a causal model for the price dynamics, both for contemporaneous and lagged relationships. In contemporaneous time, Nordic and German electricity prices are interlinked through gas prices. In the long run, electricity prices and British gas prices adjust themselves to establish the equilibrium price level, since oil, coal, continental gas and EUR/USD are found to be weakly exogenous.

Keywords: Vector; autoregression; Vector; error; correction; Electricity; markets; Causal; discovery; Non-Gaussianity; Directed; acyclic; graph; Non-experimental; data (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:33:y:2011:i:3:p:404-412

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