Common Unobserved Determinants of Intraday Electricity Prices

Nikolaos S. Thomaidis, Gordon H. Dash and Nina Kajiji

The Energy Journal, 2019, vol. 40, issue 1_suppl, 211-232

Abstract: This paper employs multilevel factor modelling techniques to unravel systematic unobserved determinants of the intraday and interzonal price curve dynamics for the Pennsylvania-New Jersey-Maryland (PJM) interconnection. These techniques make an explicit separation of global drivers from region-specific common factors, thereby facilitating the identification of the actual sources of co-variability. Our empirical findings confirm the hypothesis that the common unobserved determinants of power prices in the PJM interconnection obey a block structure, some of which affect different segments of our panel. We argue that a multilevel factor approach offers a more systematic and transparent representation of intertemporal and cross-sectional patterns in PJM electricity prices compared to alternative brute-force VARMAX parametrizations and the single-level factor models, which are often put forward in the literature as viable modelling alternatives.

Keywords: Multilevel factor models; Power price dynamics; Day-ahead electricity markets; PJM interconnection (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.5547/01956574.40.SI1.ntho (text/html)

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: https://EconPapers.repec.org/RePEc:sae:enejou:v:40:y:2019:i:1_suppl:p:211-232

DOI: 10.5547/01956574.40.SI1.ntho

Access Statistics for this article

More articles in The Energy Journal
Bibliographic data for series maintained by SAGE Publications ().