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Impact of Solar and Wind Prices on the Integrated Global Electricity Spot and Options Markets: A Time Series Analysis

Author

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  • Yasir Alsaedi

    (Department of Mathematics, Umm Al-Qura University, Makkah, Saudi Arabia,)

  • Gurudeo Anand Tularam

    (Environmental Futures Research Institute and School of Environment and Science, Griffith University, Australia,)

  • Victor Wong

    (Department of Accounting, Finance and Economics, Griffith University, Australia.)

Abstract

Following the liberalisation of the global electricity markets, spot and options markets have been established in many countries. Electricity pricing issues, coupled with increased concern regarding global warming and the greenhouse effect, represent the driving factors behind electricity price movements. Australia, Germany, the United States (US) and other countries worldwide have increasingly shifted their focus away from fossil fuels and towards energy generated from renewable sources, including solar and wind power. This paper examines the behaviour of the Australian, German and US electricity markets in terms of the impact of solar and wind pricing on the electricity spot and options markets for the period January 2006 to March 2018. Using a vector autoregression analysis, we examine both the direction of influence and the influence absorption through Granger causality testing, the impulse response function and forecast error variance decompositions. Our findings indicate that the electricity markets in Australia, Germany and the US are interdependent and related with regards to solar and wind price changes, meaning that the investigated electricity markets are influenced by movements in other electricity markets. The findings of this study are important for investors, energy analysts, government organisations and policymakers.

Suggested Citation

  • Yasir Alsaedi & Gurudeo Anand Tularam & Victor Wong, 2020. "Impact of Solar and Wind Prices on the Integrated Global Electricity Spot and Options Markets: A Time Series Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 337-353.
    • Handle: RePEc:eco:journ2:2020-02-40
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    2. Yasir Alsaedi & Gurudeo Anand Tularam & Victor Wong, 2021. "Impact of the Nature of Energy Management and Responses to Policies Regarding Solar and Wind Pricing: A Qualitative Study of the Australian Electricity Markets," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 191-205.

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    More about this item

    Keywords

    Electricity pricing; Renewable energy; VAR model.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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