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Price-caps and Efficient Pricing for the Electricity Italian Market

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  • D'Ecclesia, Rita Laura
  • Gallo, Crescenzio

Abstract

Deregulation of the electricity generating industry, under way in the United States as well as in Europe, would yield economies to operate in a more competitive environment causing improvement of efficiency and the possibility to develop related financial markets to manage price uncertainty. Electricity spot prices tend to be remarkably volatile as consequence of extreme weather conditions, therefore there seems to be sufficient price uncertainty to warrant the development of derivative markets, however it is important to verify whether the underlying spot market is sufficiently competitive and well functioning to stimulate the development of related financial markets. Analyzing the features and price volatility of European markets which undertook the same process, as well as Norwey, Germany and Spain, we formulate a simple model to control the well functioning of energy spot markets in a deregulated context. The model is tested using Norwegian, Deutsch and Spanish spot prices over the last two years in order to assess the correct price formation in competitive operating markets.

Suggested Citation

  • D'Ecclesia, Rita Laura & Gallo, Crescenzio, 2002. "Price-caps and Efficient Pricing for the Electricity Italian Market," MPRA Paper 10048, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:10048
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    File URL: https://mpra.ub.uni-muenchen.de/10048/1/MPRA_paper_10048.pdf
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    References listed on IDEAS

    as
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    3. Powell, Andrew, 1993. "Trading Forward in an Imperfect Market: The Case of Electricity in Britain," Economic Journal, Royal Economic Society, vol. 103(417), pages 444-453, March.
    4. Eirik Schroder Amundsen & Balbir Singh, 1992. "Developing Futures Markets for Electricity in Europe," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 95-112.
    5. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
    6. Aleksandr Rudkevich & Max Duckworth & Richard Rosen, 1998. "Modeling Electricity Pricing in a Deregulated Generation Industry: The Potential for Oligopoly Pricing in a Poolco," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 19-48.
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    Cited by:

    1. Crescenzio Gallo & Giancarlo De Stasio & Cristina Di Letizia, 2006. "Artificial Neural Networks in Financial Modelling," Quaderni DSEMS 02-2006, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
    2. Crescenzio GALLO, 2005. "Artificial Neural Networks in Finance Modelling," Experimental 0509002, University Library of Munich, Germany.

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    More about this item

    Keywords

    Electricity market; Price limits; Market Power;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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