Economics at your fingertips  

Performing price scenario analysis and stress testing using quantile regression: A case study of the Californian electricity market

Sjur Westgaard, Stein-Erik Fleten, Ahlmahz Negash, Audun Botterud, Katinka Bogaard and Trude Haugsvaer Verling

Energy, 2021, vol. 214, issue C

Abstract: This paper uses quantile regression to demonstrate how electricity price distributions are linked to fundamental supply and demand variables. It investigates the California electricity market (zone SP15) for selected trading hours using data from January 8, 2013 to September 24, 2016. The approach quantifies a non-linear relationship between the fundamentals and electricity prices, just as predicted by the merit order curve. Natural gas, greenhouse gas allowance prices and load all have a positive effect on electricity prices, with the effect increasing with the quantiles. In contrast, solar production and wind production both have a negative effect on electricity prices. The effect of solar production increases with quantiles, whereas the effect of wind production decreases with quantiles. This paper also includes a stress testing case study in which a producer faces the risk of high solar and wind production, and investigates the effect on the lower tail of the price distribution. Overall, the results demonstrate how the proposed approach can be a helpful risk management tool for participants in the electricity market.

Keywords: California electricity market; Quantile regression; Risk management (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

More articles in Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-05-18
Handle: RePEc:eee:energy:v:214:y:2021:i:c:s0360544220319034