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Joint Modelling of Power Price, Temperature, and Hydrological Balance with a View towards Scenario Analysis

Lunina, Veronika LU (2016) In Working Papers 2016(30).
Abstract
This study presents a model for the joint dynamics of power price, temperature, and hydrological balance, with a view towards scenario analysis. Temperature is a major demand-side factor affecting power prices, while hydrobalance is a major supply-side factor in power markets dominated by hydrological generation, such as the Nordic market. Our time series modelling approach coupled with the skew-Student distribution allows for interrelations in both mean and volatility, and accommodates most of the discovered empirical features, such as periodic patterns and long memory. We find that in the Nordic market, the relationship between temperature and power price is driven by the demand for heating, while the cooling effect during summer months... (More)
This study presents a model for the joint dynamics of power price, temperature, and hydrological balance, with a view towards scenario analysis. Temperature is a major demand-side factor affecting power prices, while hydrobalance is a major supply-side factor in power markets dominated by hydrological generation, such as the Nordic market. Our time series modelling approach coupled with the skew-Student distribution allows for interrelations in both mean and volatility, and accommodates most of the discovered empirical features, such as periodic patterns and long memory. We find that in the Nordic market, the relationship between temperature and power price is driven by the demand for heating, while the cooling effect during summer months does not exist. Hydrobalance, on the other hand, negatively affects power prices throughout the year. We demonstrate how the proposed model can be used to generate a variety of joint temperature/hydrobalance scenarios and analyse the implications for power price. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
spot power price, temperature, hydrological scenarios, VARFIMA-BEKK, skew-student
in
Working Papers
volume
2016
issue
30
pages
40 pages
publisher
Department of Economics, Lund Universtiy
language
English
LU publication?
yes
id
804d1153-3885-4b85-80bd-fbb829a3df92
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2016_030.htm
date added to LUP
2016-11-21 12:39:48
date last changed
2016-12-28 09:44:23
@misc{804d1153-3885-4b85-80bd-fbb829a3df92,
  abstract     = {This study presents a model for the joint dynamics of power price, temperature, and hydrological balance, with a view towards scenario analysis. Temperature is a major demand-side factor affecting power prices, while hydrobalance is a major supply-side factor in power markets dominated by hydrological generation, such as the Nordic market. Our time series modelling approach coupled with the skew-Student distribution allows for interrelations in both mean and volatility, and accommodates most of the discovered empirical features, such as periodic patterns and long memory. We find that in the Nordic market, the relationship between temperature and power price is driven by the demand for heating, while the cooling effect during summer months does not exist. Hydrobalance, on the other hand, negatively affects power prices throughout the year. We demonstrate how the proposed model can be used to generate a variety of joint temperature/hydrobalance scenarios and analyse the implications for power price.},
  author       = {Lunina, Veronika},
  keyword      = {spot power price,temperature,hydrological scenarios,VARFIMA-BEKK,skew-student},
  language     = {eng},
  month        = {11},
  note         = {Working Paper},
  number       = {30},
  pages        = {40},
  publisher    = {Department of Economics, Lund Universtiy},
  series       = {Working Papers},
  title        = {Joint Modelling of Power Price, Temperature, and Hydrological Balance with a View towards Scenario Analysis},
  volume       = {2016},
  year         = {2016},
}