An analysis of the relationship between electricity and natural‐gas futures prices

Emery, Gary W.; Li, Qingfeng

doi:10.1002/fut.2209

Cited by 88 publications

(66 citation statements)

References 21 publications

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“…In the reduced-form world, some authors have suggested modeling power and fuels as cointegrated processes (cf. [47,18,44,74]), while others have suggested multi-commodity Lévy based models with various ways of capturing correlations between jumps and/or diffusion components. (cf.…”

Section: 4mentioning

confidence: 99%

A Survey of Commodity Markets and Structural Models for Electricity Prices

Carmona

Coulon

2013

Quantitative Energy Finance

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Abstract. The goal of this survey is to review the major idiosyncrasies of the commodity markets and the methods which have been proposed to handle them in spot and forward price models. We devote special attention to the most idiosyncratic of all: electricity markets. Following a discussion of traded instruments, market features, historical perspectives, recent developments and various modeling approaches, we focus on the important role of other energy prices and fundamental factors in setting the power price. In doing so, we present a detailed analysis of the structural approach for electricity, arguing for its merits over traditional reduced-form models. Building on several recent articles, we advocate a broad and flexible structural framework for spot prices, incorporating demand, capacity and fuel prices in several ways, while calculating closed-form forward prices throughout.

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Section: 4mentioning

confidence: 99%

A Survey of Commodity Markets and Structural Models for Electricity Prices

Carmona

Coulon

2013

Quantitative Energy Finance

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“…. , W : Conditions (20) state that, in equilibrium, if power buyers/consumers at demand market sector k in region r 2 purchase electricity from generating unit u of genco g in region r 1 , then the price the consumers pay is exactly equal to the sum of the electricity price and the unit transaction cost. However, if the electricity price plus the transaction cost is greater than the price the buyers/consumers are willing to pay at the demand market, there will be no transaction between this generating unit/demand market pair.…”

Section: Equilibrium Conditions For the Demand Marketsmentioning

confidence: 99%

“…In equilibrium, conditions (20) and (21) must hold simultaneously for all demand markets in all regions. We can express these equilibrium conditions using the following variational…”

Section: Equilibrium Conditions For the Demand Marketsmentioning

confidence: 99%

“…[57]) to fully exploit the structure of the network subproblems [57]. The demand market prices ρ * r 2 kw for all r 2 , k, w can be recovered from the path costs of the active paths in the reformulated path flow formulation, or from conditions (20) or (21). Each example in this section was solved within 300 minutes on a Lenovo laptop with the 2.1GHz Core(TM)2 Duo CPU.…”

Section: Datamentioning

confidence: 99%

“…Emery and Liu [20] empirically estimated the cointegration of electric power futures and natural gas futures. Routledge, Seppi, and Spatt [73] focused on the connections between natural gas and electricity markets, and studied the equilibrium pricing of electricity contracts (see also [5]).…”

Section: Introductionmentioning

confidence: 99%

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An integrated electric power supply chain and fuel market network framework: Theoretical modeling with empirical analysis for New England

Liu

Nagurney

2009

Naval Research Logistics

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In this paper, we develop a novel electric power supply chain network model with fuel supply markets that captures both the economic network transactions in energy supply markets and the physical network transmission constraints in the electric power network. The theoretical derivation and analysis are done using the theory of variational inequalities.We then apply the model to a specific case, the New England electric power supply chain, consisting of 6 states, 5 fuel types, 82 power generators, with a total of 573 generating units, and 10 demand market regions. The empirical case study demonstrates that the regional electric power prices simulated by the proposed model very well match the actual electricity prices in New England. We also compute the electric power prices and the spark spread, an important measure of the power plant profitability, under natural gas and oil price variations. The empirical examples illustrate that in New England, the market/gridlevel fuel competition has become the major factor that affects the influence of the oil price on the natural gas price. Finally, we utilize the model to quantitatively investigate how changes in the demand for electricity influence the electric power and the fuel markets from a regional perspective. The theoretical model can be applied to other regions and multiple electricity markets under deregulation to quantify the interactions in electric power/energy supply chains and their effects on flows and prices.

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A first look at the empirical relation between spot and futures electricity prices in the United States

Shawky

Marathe

Barrett

2003

Journal of Futures Markets

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In this article we investigate the statistical properties of wholesale electricity spot and futures prices traded on the New York Mercantile Exchange for delivery at the California–Oregon Border. Using daily data for the years 1998 and 1999, we find that many of the characteristics of the electricity market can be viewed to be broadly consistent with efficient markets. The futures risk premium for 6‐month futures contracts is estimated to be 0.1328% per day or about 4% per month. Using a GARCH specification, we estimate minimum variance hedge ratios for electricity futures. Finally, we study the dynamic relation between spot and futures prices using an Exponential GARCH model and between the spot and futures returns series using a vector autoregression. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:931–955, 2003

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An analysis of the relationship between electricity and natural‐gas futures prices

Cited by 88 publications

References 21 publications

A Survey of Commodity Markets and Structural Models for Electricity Prices

A Survey of Commodity Markets and Structural Models for Electricity Prices

An integrated electric power supply chain and fuel market network framework: Theoretical modeling with empirical analysis for New England

A first look at the empirical relation between spot and futures electricity prices in the United States

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