Weather and market specificities in the regional transmission of renewable energy price effects

Carvalho Figueiredo, N, Pereira da Silva, P and Bunn, D W (2016) Weather and market specificities in the regional transmission of renewable energy price effects. Energy, 114 (1). pp. 188-200. ISSN 0360-5442 OPEN ACCESS

Abstract

This study is motivated by the observation that the effects of renewable energy output variations across several integrated power markets are likely to be complicated by price arbitrage and weather dynamics. Wind in particular has supply side effects when associated with substantial generating facilities, but also demand side influences when associated with extreme weather conditions. To unravel these effects, daily electricity prices and the weather variables wind, temperature and their interaction (wind chill) in the Central-West Europe coupled market were analysed from 2007 to the end of 2014 by means of vector autoregressions. The spillover effects were found to be quite subtle. Despite efficient price arbitrage, it is not the case that daily wind output shocks diffuse uniformly across all markets, or that the largest generator of wind energy creates the most significant spillovers or that high wind conditions necessarily lead to lower prices. Market specificities matter and are important for operational prediction and weather risk hedging.

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Item Type: Article
Subject Areas: Management Science and Operations
Additional Information: © 2016 Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0
Subjects: P > Power industries
E > Electricity supply industry
Date Deposited: 31 Oct 2016 13:27
Last Modified: 28 Aug 2018 18:01
URI: http://lbsresearch.london.edu/id/eprint/551
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