Essays in electricity markets

Hoang, Philip. (2005). Essays in electricity markets PhD Thesis, School of Business, The University of Queensland.

       
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Author Hoang, Philip.
Thesis Title Essays in electricity markets
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 2005
Thesis type PhD Thesis
Supervisor Stephen F. Gray
Total pages 260
Collection year 2005
Language eng
Subjects L
350301 Finance
710401 Finance and investment services
Formatted abstract

At the wholesale level, the supply and consumption of electricity world-wide is increasingly structured as a market-style model: these markets are often referred to simply as 'electricity markets'. This work is a collection of five separate papers on these unique markets. However the focus will be mainly on the Australian National Electricity Market ( 'NEM'), which was formed in December 1998, and comprises of the NSW. VIC, QLD, SA and Snowy regions. The first paper is an overview of electricity markets: a description of the NEM spot market is provided, as well as a discussion on the various regulatory issues, related factor and ancillary markets, and the financial market. There is also a brief overview on the Nordic, UK and the California market redesign. The second paper probes deeper into the key drivers of electricity derivative markets and the various derivative instruments which are commonly marketed. Precise definitions and commercial applications are also illustrated. The third paper analyses a series of empirical stylizations of electricity spot prices through illustrative NEM datasets. 8 'Stylized Facts' describe the price process, which include: intra-day, day-of-week and monthly seasonality in means and volatility; price persistence and conditional volatility in the 'low-price' process; the regular occurrence and importance of 'jump-prices'; seasonality, conditionality and inter-temporal dynamics in jump-prices; and finally a conditional 'mean-reversion' rate. The fourth paper specifies an Electricity Market Model (‘EMM’) based upon the Press mixture-distribution framework: however extensive variations in specification are required to capture the many stylizations of the spot price dynamics. We find that the EMM provides a close match to the illustrative dataset's empirical marginal distributions, as well as other measures of fit from model simulated prices. The fifth paper introduces an alternative computer-intensive valuation technique based upon the EMM probability measure. This approach is ideally suited to the parametric distributional specification of the EMM. The method provides an efficient and accurate means to price various electricity derivative instruments using market information, while maintaining some consistency with historical information. 

Keyword Electric utilities -- Accounting -- Australia

 
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Created: Fri, 24 Aug 2007, 18:39:25 EST