Estimating the Volatility of Electricity Prices: The Case of the England and Wales Wholesale Electricity Market

Sherzod Tashpulatov ()

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: Price fluctuations that partially comove with demand are a specific feature inherent to liberalized electricity markets. The regulatory authority in Great Britain, however, believed that sometimes electricity prices were significantly higher than what was expected and, therefore, introduced price-cap regulation and divestment series. In this study, I analyze how the introduced institutional changes and regulatory reforms affected the dynamics of daily electricity prices in the England and Wales wholesale electricity market during 1990-2001. The research finds that the introduction of price-cap regulation did achieve the goal of lowering the price level at the cost of higher price volatility. Later, the first series of divestments is found to be successful in lowering price volatility, which however happens at the cost of a higher price level. Finally, the study also documents that the second series of divestment was more successful in lowering both the price level and volatility.

Keywords: electricity prices; seasonality; Fourier transform; conditional volatility; regulation. (search for similar items in EconPapers)
JEL-codes: C22 C51 L50 L94 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-ene and nep-reg
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Related works:
Journal Article: Estimating the volatility of electricity prices: The case of the England and Wales wholesale electricity market (2013)
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