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Heterogeneous price dynamics in U.S. regional electricity markets

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  • Dias, José G.
  • Ramos, Sofia B.

Abstract

The U.S. electricity wholesale market is organized in several deregulated regional markets. This paper compares price dynamics of electricity in the U.S. wholesale markets and shows that electricity prices from the West and East coasts have different regime dynamics. Our methodology suggests that electricity prices are better parameterized by four regimes with different levels of volatility. Additionally, West and East coast markets differ in the time spent in each regime. The extremely high volatility regime describes West coast prices during the California electricity crisis, but East coast prices are also frequent in that regime. We find evidence of synchronization of price dynamics in the mean-reverting and highest volatility regimes, i.e., prices from the East and West coasts tend to be in the same regimes at the same time.

Suggested Citation

  • Dias, José G. & Ramos, Sofia B., 2014. "Heterogeneous price dynamics in U.S. regional electricity markets," Energy Economics, Elsevier, vol. 46(C), pages 453-463.
    • Handle: RePEc:eee:eneeco:v:46:y:2014:i:c:p:453-463
    DOI: 10.1016/j.eneco.2014.05.012
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    Cited by:

    1. Erdogdu, Erkan, 2016. "Asymmetric volatility in European day-ahead power markets: A comparative microeconomic analysis," Energy Economics, Elsevier, vol. 56(C), pages 398-409.
    2. Fan, Qingju, 2016. "Asymmetric multiscale detrended fluctuation analysis of California electricity spot price," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 442(C), pages 252-260.
    3. Bigerna, Simona & Bollino, Carlo Andrea & Ciferri, Davide & Polinori, Paolo, 2017. "Renewables diffusion and contagion effect in Italian regional electricity markets: Assessment and policy implications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 68(P1), pages 199-211.

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    More about this item

    Keywords

    U.S. electricity markets; Deregulation; Electricity prices; Regime switching models; Volatility; Mean-reversion mechanism;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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