Spatial Econometrics in Electricity Markets Research

Rita De Siano () and Alessandro Sapio

Chapter 6 in Handbook of Energy Finance:Theories, Practices and Simulations, 2020, pp 121-156 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter outlines the theoretical foundations and empirical applications of spatial econometrics in energy markets research. Spatial econometrics addresses spatial autocorrelation and spatial heterogeneity, two key issues of energy finance that have emerged during the low carbon transition. Indeed, with congested grids and a high penetration of geographically heterogeneous intermittent renewables, electricity markets can be more accurately modeled and forecasted by considering spatial effects. After illustrating the main spatial aspects of electricity pricing, production, and consumption, the chapter summarizes the theory of spatial econometrics and highlights its advantages over alternative estimation methods. Existing applications of spatial econometrics to electricity markets are thus reviewed (e.g. forecasting electricity demand and wholesale electricity prices and assessing the diffusion of photovoltaics). Methodological implications and ongoing issues are discussed in the final section.

Keywords: Energy Finance; Financial and Economic Modeling; Volatility; Forecasting; Quantitative Finance; Energy Markets (search for similar items in EconPapers)
JEL-codes: G20 G32 Q40 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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