Stochastic modeling of electricity markets

Talaslı, İrem
Day-ahead spot electricity markets are the most transparent spot markets where one can find integrated supply and demand curves of the market players for each settlement period. Since it is an indicator for the market players and regulators, in this thesis we model the spot electricity prices. Logarithmic daily average spot electricity prices are modeled as a summation of a deterministic function and multi-factor stochastic process. Randomness in the spot prices is assumed to be governed by three jump processes and a Brownian motion where two of the jump processes are mean reverting. While the Brownian motion captures daily regular price movements, the pure jump process models price shocks which have long term effects and two Ornstein Uhlenbeck type jump processes with different mean reversion speeds capturing the price shocks that affect the price level for relatively shorter time periods. After removing the seasonality which is modeled as a deterministic function from price observations, an iterative threshold function is used to filter the jumps. The threshold function is constructed on volatility estimation generated by a GARCH(1,1) model. Not only the jumps but also the mean reverting returns following the jumps are filtered. Both of the filtered jump processes and residual Brownian components are estimated separately. The model is applied to Austrian, Italian, Spanish and Turkish electricity markets data and it is found that the weekly forecasts, which are generated by the estimated parameters, turn out to be able to capture the characteristics of the observations. After examining the future contracts written on electricity, we also suggest a decision technique which is built on risk premium theory. With the help of this methodology derivative market players can decide on taking whether a long or a short position for a given contract. After testing our technique, we conclude that the decision rule is promising but needs more empirical research.


Capacity trading in electricity markets
Çubuklu, Ömer; Sevaioğlu, Osman; Department of Electrical and Electronics Engineering (2012)
In electricity markets, capacity cost must be determined in order to make capacity trading. In this thesis, capacity cost and the factors deriving the capacity cost are studied. First, fixed capacity cost of power plants is examined. Direct and indirect costs of fixed capacity cost are detailed with respect to different types of power plants and the impact of these factors to the capacity cost is given. Second, interconnection and system utilization costs of transmission and distribution system are consider...
Optimal bidding strategies for day ahead electricity market by risk constrained stochastic price based unit commitment
Shileh Baf, Amir; Ulusoy, İlkay; Tör, Osman Bülent; Department of Electrical and Electronics Engineering (2014)
Optimum bidding curves for a generating company to take part in the day ahead energy market are developed throughout this thesis. Continuous aim of the generating company to maximize its profit will be partly fulfilled by optimizing its bidding in the market. Price uncertainty has always been a major issue for proper bidding and maximizing the payoff. In contrast with traditional Price Based Unit Commitment which is only dependent on a good forecast of energy prices, stochastic programming takes care of the...
Empirical analysis of the relationship between electricity demand and economic uncertainty
Akarsu, Gülsüm; Gaygısız Lajunen, Esma; Department of Electrical and Electronics Engineering (2013)
The determination of the factors that influence electricity demand and the estimation of price and income elasticities are very crucial for both effective policies and consistent demand projections. The purposes of this dissertation are to investigate the determinants of electricity demand, to obtain the price and income elasticities, and to examine the effect of economic uncertainty/volatility on the electricity demand. We model electricity demand as a function of electricity price, income, urbanization ra...
Time series analysis and forecasting electricity prices in Turkey
Zakeri, Seyed Amir Hamed; Yozgatlıgil, Ceylan; Uğur, Ömür; Department of Statistics (2015)
Due to the liberalization of the electricity market, prices are now determined based on contracts on regulated markets and their behavior is mainly driven by constant supply and demand forces. Power producers and consumers need accurate price forecasting tools in a competitive market. Price forecasts give important information for producers and consumers to plan bidding strategies to maximize their bene ts and utilities. Analysis of hourly electricity prices in Turkey is challenging due to the existence of ...
Day ahead markets
Kütaruk, Kaan; Sevaioğlu, Osman; Department of Electrical and Electronics Engineering (2013)
Day Ahead Market is a mechanism in electricity markets for adjusting the supply-demand energy and capacity balance by providing bids one day before the clearing. Market operator needs to know the available energy and capacity for reaching minimal-cost supply-demand balance one day earlier than the market has been cleared. Minimizing cost of the electricity and capacity during 24 hours of a day requires accurate information concerning the available electricity and capacity. Day-ahead marketing activity is pe...
Citation Formats
İ. Talaslı, “Stochastic modeling of electricity markets,” Ph.D. - Doctoral Program, Middle East Technical University, 2012.