Modelling Spikes in Electricity Prices
Becker, Ralf & Hurn, Stan (2007) Modelling Spikes in Electricity Prices. Economic Record, 83(263), pp. 371-382.
uring periods of market stress, electricity prices can rise dramatically. Electricity retailers cannot pass these extreme prices on to customers because of retail price regulation. Improved prediction of these price spikes therefore is important for risk management. This paper builds a time-varying-probability Markov-switching model of Queensland electricity prices, aimed particularly at forecasting price spikes. Variables capturing demand and weather patterns are used to drive the transition probabilities. Unlike traditional Markov-switching models that assume normality of the prices in each state, the model presented here uses a generalised beta distribution to allow for the skewness in the distribution of electricity prices during high-price episodes.
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|Item Type:||Journal Article|
|Subjects:||Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200)|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
|Deposited On:||07 Jun 2010 02:22|
|Last Modified:||29 Feb 2012 13:33|
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