EconPapers    
Economics at your fingertips  
 

Fundamental and speculative shocks, what drives electricity prices?

Katarzyna Maciejowska ()

No HSC/14/05, HSC Research Reports from Hugo Steinhaus Center, Wroclaw University of Science and Technology

Abstract: In the paper, Structural Vector Autoregressive models (SVAR) are used to identify fundamental and speculative shocks, in the UK electricity market. The structural shocks are identified via short run restrictions, which are imposed on the matrix of instantaneous effects. In the research, two main types of shocks are considered: fundamental shocks, which result from unexpected changes of demand, supply and generation costs and speculative shocks, which are associated solely with electricity prices. The results indicate that speculative shocks play an important role in the price setting process. Although they account for a significant part (from 30% to 95%) of the price volatility, I do not find evidence that the influence differs between peak and off-peak hours. When fundamental shocks are considered, some dependence between their effects on electricity prices and periods of the day is confirmed. For example, the impact of wind supply shocks on electricity prices is significantly stronger during the peak hours than during the off-peak hours. Moreover, they become a major source of electricity price volatility during the peak hours. Finally, it is confirmed that shocks associated with generation costs (prices of fuels) don’t have any instantaneous effect on the electricity prices.

Keywords: Electricity spot prices; Structural analysis; Vector autoregression (search for similar items in EconPapers)
JEL-codes: C32 C51 E31 Q41 Q47 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2014-04-30
New Economics Papers: this item is included in nep-ene, nep-mac and nep-reg
References: Add references at CitEc
Citations: View citations in EconPapers (20)

Forthcoming in IEEE Conference Proceedings, 11th International Conference on the European Energy Market (EEM'14).

Downloads: (external link)
http://www.im.pwr.wroc.pl/~hugo/RePEc/wuu/wpaper/HSC_14_05.pdf Original version, 2014 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to kkm.im.pwr.edu.pl:443 (Bad file descriptor) (http://www.im.pwr.wroc.pl/~hugo/RePEc/wuu/wpaper/HSC_14_05.pdf [301 Moved Permanently]--> https://kkm.im.pwr.edu.pl/~hugo/RePEc/wuu/wpaper/HSC_14_05.pdf)

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:wuu:wpaper:hsc1405

Access Statistics for this paper

More papers in HSC Research Reports from Hugo Steinhaus Center, Wroclaw University of Science and Technology Contact information at EDIRC.
Bibliographic data for series maintained by Rafal Weron ().

 
Page updated 2025-02-14
Handle: RePEc:wuu:wpaper:hsc1405