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    Modelling electricity prices with forward looking capacity constraints

    Cartea, Alvaro and Figueroa, M.G. and Geman, Hélyette (2008) Modelling electricity prices with forward looking capacity constraints. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    We present a spot price model for wholesale electricity prices which incorporates forward looking information that is available to all market players. We focus on information that measures the extent to which the capacity of the England and Wales generation park will be constrained over the next 52 weeks. We propose a measure of ‘tight market conditions’, based on capacity constraints, which identifies the weeks of the year when price spikes are more likely to occur. We show that the incorporation of this type of forward looking information, not uncommon in the electricity markets, improves the modeling of spikes (timing and magnitude) and the different speeds of mean reversion.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 0802
    Keyword(s) / Subject(s): capacity constraints, mean reversion, electricity indicated demand, electricity indicated generation, regime switching model
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Commodities Finance Centre
    Depositing User: Administrator
    Date Deposited: 09 Jul 2013 07:30
    Last Modified: 07 Dec 2016 15:31
    URI: http://eprints.bbk.ac.uk/id/eprint/7594

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