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Financial Analytics: Science and Experience
 

Electricity price: What determines its change on different time scales?

Vol. 10, Iss. 9, SEPTEMBER 2017

PDF  Article PDF Version

Received: 6 July 2017

Received in revised form: 7 August 2017

Accepted: 10 August 2017

Available online: 20 September 2017

Subject Heading: ECONOMIC AND STATISTICAL RESEARCH

JEL Classification: C22, L94, Q41

Pages: 1032–1047

https://doi.org/10.24891/fa.10.9.1032

Afanas'ev D.O. Financial University under Government of Russian Federation, Moscow, Russian Federation
doafanasiev@fa.ru

Importance The paper considers the issues of pricing on the wholesale electricity market under the influence of fundamental factors (demand, fuel prices).
Objectives The paper's aim is to identify the factors that significantly affect the wholesale electricity price on different time scales.
Methods The study uses the developed multi-scale adaptive approach based on time-dependent internal regression and empirical mode decomposition. I investigate two day-ahead electricity markets: the price areas Europe-Ural and Siberia of the Russian exchange ATS during the period from April 1, 2011 to December 31, 2013.
Results The influence of fundamental factors on the electricity price depends on the time scales considered. The impact of fuel prices on the electricity price does not appear in short-term periods and manifests only in the mid-term or long-term time scales.
Conclusions and Relevance For the thorough price forecasting, there is a need in rejection of the traditional mono-fractal approach. For instance, in the Europe-Ural price area, it is necessary to focus on demand forecasting and its impact on price, while for Siberia, only long-term changes in demand should be taken into account.

Keywords: price, electric energy, demand, decomposition, empiric mode, internal regression

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