wind power in the danish liberalised power market policy measures price impact and investor incentives wind power has a strong position at the danish electricity market mainly caused by high feed in tariffs in the 1990s investments in new wind power installations on land however have declined dramatically after the danish electricity market was liberalised in 1999 first the paper describes how policy measures directed towards wind power have been redesigned to match the liberalised market then we estimate the impact of the redesigned tariffs on the electricity prices finally we assess whether the new tariffs make an incentive to invest in wind power the paper concludes that the new tariffs not by itself make evidence for the actual danish recession in new wind power installations after the electricity reform the main causes could include a combination of problems in spatial planning high risk aversion of new wind turbine investors and perhaps more favourable support schemes in other countries

generating conditional expectations from models with selectivity bias abstract this paper discusses how conditional expectations should be generated from models with sample selectivity we argue that the conventional method ignores relevant and available information and produces unreliable results an alternative approach is suggested and the empirical example of black white wage differentials is presented

the dark side of the sun how solar power production affects the market value of solar and gas sources abstract using daily data for the italian wholesale day ahead power market over the period 2008 2013 we assess the impact of solar production on the market value of solar and gas sources defined using the concepts of value factor and unit revenues we find that on average solar generation negatively affects the solar source market value causing a departure from the grid parity condition and mining their competitiveness once public incentives are removed this negative relation is not constant over time and becomes stronger for increasing solar penetration in the energy mix interestingly the opposite is found when looking at gas while the relation between solar production and the gas market value is negative or not significant when the former is low it turns positive for higher levels of solar production this is the result of a change in gas producers bidding strategies indeed in the italian power market the highest hourly price has shifted from the peak daytime when solar production is concentrated to the off peak nighttime when solar is absent from the market and gas can exploit temporary market power

the merit order effect of wind and river type hydroelectricity generation on turkish electricity prices abstract the environmental concerns and dependency on gas imports push turkish policy makers to find ways of increasing the share of renewable sources in electricity generation providing incentives for renewable energy in the form of feed in tariffs is one of the measures to achieve this goal basing on the data of turkish electricity market operator we quantified the magnitude of the price effects of wind and river type hydro generations on hourly average of day ahead prices we find that wind and river type hydro plants reduced the spot electricity prices during the period of 2012 2017 and despite these resources get the same incentives their impacts on the spot prices and price volatility are different this can be useful for a more comprehensive cost benefit analysis aimed at differentiating incentive schemes the paper also discusses possible underlying reasons of these different impacts such as high seasonality of hydro generation and volatility of wind generation finally we show that assuming more than 75 of the price reductions were reflected into the consumer prices in turkey the net impact of wind and river type hydro generation on final consumer prices would be negative this finding contributes to the discussions on renewable energy incentive mechanisms

low natural gas prices and the financial cost of ramp rate restrictions at hydroelectric dams abstract peaking hydroelectric dams that employ variable stop start reservoir releases can have adverse impacts on downstream river ecosystems efforts to mitigate these impacts have relied predominantly on the use of ramp rate restrictions which limit the magnitude of hour to hour changes in reservoir discharge ramp rate restrictions shift hydropower production towards less valuable off peak hours imposing a financial penalty on dam owners that is a function of the spread difference between peak and off peak electricity prices this study examines how low natural gas prices in the u s have reduced the cost of implementing ramp rate restrictions at dams by narrowing the peak off peak price spread significantly lower costs of ramp rate restrictions could open new opportunities for improving environmental flows at dams including the purchase of more natural streamflow patterns by downstream stakeholders a type of arrangement for which there is growing precedent we also explore the role that uncertainty in the cost of ramp rate restrictions could play in precluding downstream stakeholders from forming these types of agreements with dam owners results suggest that financial collar contracts could mostly eliminate inter annual variability in the net cost of restrictions and provide those purchasing more natural flows with greater certainty

the impact of wind power generation on the electricity price in germany abstract this paper investigates the relationship between intermittent wind power generation and electricity price behaviour in germany using a garch model i evaluate the effect of wind electricity generation on the level and the volatility of the electricity price in an integrated approach the results show that variable wind power reduces the price level but increases its volatility this paper s results also indicate that regulatory change has stabilised the wholesale price the electricity price volatility has decreased in germany after a modification of the marketing mechanism of renewable electricity this gives confidence that further adjustments to regulation and policy may foster a better integration of renewables into the power system

on the economics of ramping rate restrictions at hydro power plants balancing profitability and environmental costs this paper examines the impact of ramping rate restrictions imposed on hydro operations to protect aquatic ecosystems a dynamic optimization model of the profit maximizing decisions of a hydro operator is solved for various restrictions on water flow using data for a representative hydro operation in ontario profits are negatively affected but for a range of restrictions the impact is not large ramping restrictions cause a redistribution of hydro production over a given day which can result in an increase in total hydro power produced this affects the need for power from other sources with consequent environmental impacts

optimal economic dispatch and risk management of thermal power plants in deregulated markets this paper presents a methodology for the valuation optimization market margin and credit risk management of gas fired power plants and associated tolling contracts term structure models for the power and gas forward curves are employed to facilitate hedging and risk adjustment and for improved forecasting of short term prices the model for the power forward curve is capable of reproducing the important phenomena often observed in power markets including spot price spikes and spike clustering negative prices and the empirically observed volatility term structures of power and gas forward prices as well as the correlation term structure between these forward curves the method solves the stochastic dynamic optimization problem that arises from the inclusion of the various operational constraints of gas fired power plants including minimum uptime and downtime requirements ramp rate restrictions and costs variable output and efficiency rates and minimum generation levels the model involves the so

getting the safe minimum standard to work in the real world a case study in moral pragmatism abstract there is growing endorsement of local stake holder conventions to resolve unusual environmental disputes the conventions are separate decision making bodies designed to by pass conventional institutions the hazards of a stake holder convention which is overly detached from conventional decision making leads to a discourse that never successfully confronts the value controversies which the stake holder convention is charged to resolve a case study uncovers obvious and robust strategic manipulations of stake holder conventions that intrude on value dialogue an appeal to the safe minimum standard rules of ciriacy wantrup updated to engage this question successfully corrects some of the more egregious stumbling blocks to good faith dialogue in local discourse the proposed constraints on the stake holder convention can be quite directive authoritative and bureaucratic yet the constraints are necessary to preserve good faith conduct within the dialogue

male labour force participation following illness or injury this paper develops a model of the disabled individual s labour force participation decision following illness or injury and confronts it with data on the financial consequences of ill health a utility function is specified which allows for the effect of changes in health on work leisure preferences and is evaluated in relation to a household budget constraint estimation is through maximization of the appropriate likelihood function correcting for self selection bias within a switching regression model results are presented showing significant effects of financial variables on participation and these are seen to vary with age disability and income

economics of pooling small local electricity prosumers lcoe self consumption abstract the arrival of small scale decentralized energy installations coincides with the emergence of so called prosumers entities households that are producer and consumer of energy in one this research focuses on an electricity prosumer model in the context of the uk market levelized cost of electricity lcoe for photovoltaic pv and wind energy will be modeled for six uk sites additionally self consumption levels for two different load profiles and technologies will be estimated per site the simulations are modeled with homer software and multiple inputs will be varied including natural resource equipment cost maintenance cost equipment life expectancy cost of capital project life and load profiles the modeled self consumption levels show significant differences and varied between 31 and 72 depending on load profile itself and re technologies mixes modeled the pooling of prosumers implied by lower load profile volatility proved to be beneficial to self consumption levels in the modeled scenarios up to 17 6 lcoe showed significant ranges depending on the input parameters and their combination 10 55 p kw h for pv and 2 19 p kw h for wind the combination of these factors is decisive for the final lcoe and the negative effects of less benign factors can be compensated by other parameters when compared to current electricity retail prices of around 15 p kw h around 97 of wind sites and around 4 of pv scenarios implied lcoe reached grid parity the self consumption levels and lcoe analysis indicate the viability of electricity prosumer models

the influence of temperature on spike probability in day ahead power prices it is well known that day ahead prices in power markets exhibit spikes and time varying volatility spikes and extremely high volatility are the results of short term frictions in demand and or supply conditions it is known that information on load or the reserve margin help to forecast spikes however these variables are not timely available for every market participant and this paper suggests to use temperature as a proxy interpreting the results from several switching regimes models the paper shows that the probability of spike occurrence increases when temperature deviates substantially from mean temperature levels

product value as a determinant of opec s official crude oil prices additional evidence the rate of imitation of a capital embodied process innovation economica 44 feb 1977 63 69 sahal devendra patterns of technological innovation reading ma addison wesley 1981 saxonhouse gary r estimated parameters as dependent variables american economic review 66 mar 1976 178 183 theil henri on the estimation of relationships involving qualitative variables american journal of sociology 76 july 1970 103 154 principles of econometrics new york wiley sons 1971 walker david an analysis of financial and structural characteristics of banks with retail eft machines working paper 79 1 fdic 1979

winds of change how high wind penetrations will affect investment incentives in the gb electricity sector abstract wind power is widely expected to expand rapidly in britain over the next decade large amounts of variable wind power on the system will increase market risks with prices more volatile and load factors for conventional thermal plant lower and more uncertain this extra market risk may discourage investment in generation capacity financial viability for thermal plant will be increasingly dependent on price spikes during periods of low wind increased price risk will also make investment in other forms of low carbon generation e g nuclear power more challenging a number of policies can reduce the extent to which generators are exposed to market risks and encourage investment however market risks play a fundamental role in shaping efficient investment and dispatch patterns in a liberalised market therefore measures to improve price signals and market functioning such as a stronger carbon price and developing more responsive demand are desirable however the scale of the investment challenge and increased risk mean targeted measures to reduce although not eliminate risk exposure such as capacity mechanisms and fixed price schemes may have increasing merit the challenge for policy is to strike the right balance between market and planned approaches

valuation and optimal operation of electric power plants in competitive markets we present an algorithm for the valuation and optimal operation of hydroelectric and thermal power generators in deregulated electricity markets real options theory is used to derive nonlinear partial integro differential equations pides for the valuation and optimal operating strategies of both types of facilities the equations are designed to incorporate a wide class of spot price models that can exhibit the same time dependent mean reverting dynamics and price spikes as those observed in most electricity markets particular attention is paid to the operational characteristics of real power generators for thermal power plants these characteristics include variable start up times and costs control response time lags minimum generating levels nonlinear output functions and structural limitations on ramp rates for hydroelectric units head effects and environmental constraints are addressed we illustrate the models with numerical examples of a pump storage facility and a thermal power plant this pide framework can achieve high levels of computational speed and accuracy while incorporating a wide range of spot price dynamics and operational characteristics

toward efficiency in the crude oil market the official opec prices of crude oil before the collapse in the oil market in the mid 1980s can be interpreted as contract prices and analysed on the basis of the theory of futures or forward markets this paper uses the generalized method of moments estimation technique to test for efficiency in the relationship between the official prices and the ex post spot prices at the time of delivery efficiency is rejected for the sample period 1978 1985 as a whole but evidence is found of improvements over time further the gmm wald and hansen tests although asymptotically equivalent are shown to differ greatly when applied to a small sample of monthly oil price data

optimal provision of hydroelectric power under environmental and regulatory constraints hydroelectric power plants can quickly and inexpensively respond to changes in electricity demand however this operational flexibility can cause negative environmental im pacts and these environmental effects are miti gated through direct restrictions on hydropower operations rather than taxes or other market based mechanisms a dynamic model of hydro electric generation is used to derive hourly hydro electric generation and purchases of replacement power to meet contract demand in the presence of these operational restrictions the pattern of hydropower generation is shown to depend on differences between on peak and off peak spot electricity prices within the operational restric tions set by external regulatory mechanisms

predicting price spikes in electricity markets using a regime switching model with time varying parameters this paper shows that a stochastic regime switching model can represent the volatile behavior of wholesale electricity prices associated with price spikes effectively the structure of the model is very flexible because the mean prices in the two regimes and the two transition probabilities are functions of the load and or the implicit reserve margin using price data from the single settlement market in pjm may 1999 to may 2000 the results show that the estimated switching probability from the low to the high regime predicts price spikes well if the reserve margin is measured accurately

decentralizing hydro power production we analyse the production of electricity from n power stations in a dynamic model each power station s production of electricity is constrained by the quantity of water available to it supply constraint as well as limitations on reservoir capacity storage constraint we show that hydro power production can lead to two sources of welfare loss suboptimal management of water resources and the exercise of market power a monopolist minimizes the first source of inefficiency whereas decentralized production in a competitive environment minimizes the second the decision to introduce competition in hydropower production must account for these two opposite effects jel classification l11 q48 decentralisation de la production d hydroelectricite nous analysons la production d hydroelectricite par n centrales dans un modele dynamique la production de chaque centrale est contrainte par la quantite d eau disponible contrainte d approvisionnement et la capacite du reservoir contrainte de stockage nous demontrons que la production hydroelectrique peut donner lieu a deux types d inefficacite la gestion sous optimale des ressources hydrauliques et l exercice de pouvoir de marche l entreprise monopolistique minimise la premiere inefficacite alors que la production decentralisee dans un marche concurrentiel minimise la deuxieme la decision d introduire la concurrence dans la production d hydroelectricite doit tenir compte de ces deux effets opposes

on the market impact of wind energy forecasts this paper presents an analysis of how day ahead electricity spot prices are affected by day ahead wind power forecasts demonstration of this relationship is given as a test case for the western danish price area of the nord pool s elspot market impact on the average price behaviour is investigated as well as that on the distributional properties of the price by using a non parametric regression model to assess the effects of wind power forecasts on the average behaviour the non linearities and time variations in the relationship are captured well and the effects are shown to be quite substantial furthermore by evaluating the distributional properties of the spot prices under different scenarios the impact of the wind power forecasts on the price distribution is proved to be considerable the conditional price distribution is moreover shown to be non gaussian this implies that forecasting models for electricity spot prices for which parameters are estimated by a least squares techniques will not have gaussian residuals hence the widespread assumption of gaussian residuals from electricity spot price models is shown to be inadequate for these model types the revealed effects are likely to be observable and qualitatively similar in other day ahead electricity markets significantly penetrated by wind power

quantifying the effect of renewable generation on day ahead electricity market prices the spanish case abstract the penetration of renewable generation has grown since the electricity sector has been deregulated to account for that this paper proposes a methodology to estimate the downward effect of renewable generation participation upon the day ahead electricity market prices since such an effect is quite intuitive observing the merit order of the generating units the european electricity market matching algorithm emma is currently based on euphemia price coupling of regions though there are several differences among countries across europe the new algorithm proposed uses market orders which include aggregate hourly orders such as aggregate supply and demand curves these orders are simple orders and the marginal price is affected by complex orders especially by the minimum income condition mic used in the iberian electricity market and considered in our proposed algorithm a case study of the spanish day ahead electricity market is evaluated for 2015 for which a daily generation sample is composed of 16 days in 2015 the sample is created following the characteristics of thermal production renewable production and inframarginal production the conclusions are drawn comparing the simulations of the real marginal prices and the new marginal prices after incorporating renewable generation participation into the aggregate demand curve at the maximum price

spot and derivative pricing in the eex power market using spot and futures price data from the german eex power market we test the adequacy of various one factor and two factor models for electricity spot prices the models are compared along two different dimensions 1 we assess their ability to explain the major data characteristics and 2 the forecasting accuracy for expected future spot prices is analyzed we find that the regime switching models clearly outperform its competitors in almost all respects the best results are obtained using a two regime model with a gaussian distribution in the spike regime furthermore for short and medium term periods our results underpin the frequently stated hypothesis that electricity futures quotes are consistently greater than the expected future spot a situation which is denoted as contango

pre announcement effects news effects and volatility monetary policy and the stock market abstract i examine pre announcement and news effects on the stock market in the context of public disclosure of monetary policy decisions the results suggest that the stock market tends to be relatively quiet conditional volatility is abnormally low on days preceding regularly scheduled policy announcements although this calming effect is routinely reported in anecdotal press accounts it is statistically significant only over the past four to five years a result that i attribute to changes in the federal reserve s disclosure practices in early 1994 the paper also looks at how the actual interest rate decisions of policy makers affect stock market volatility the element of surprise in such decisions tends to boost stock market volatility significantly in the short run and positive surprises higher than expected values of the target federal funds rate tend to have a larger effect on volatility than negative surprises the implications of the results for broader issues in the finance and economics literatures are also discussed

an optimal stochastic control framework for determining the cost of hedging of variable annuities abstract an implicit partial differential equation pde method is used to determine the cost of hedging for a guaranteed lifelong withdrawal benefit glwb variable annuity contract in the basic setting the underlying risky asset is assumed to evolve according to geometric brownian motion but this is generalised to the case of a markov regime switching process a similarity transformation is used to reduce a pricing problem with k regimes to the solution of k coupled one dimensional pdes resulting in a considerable gain in computational efficiency the methodology developed is flexible in the sense that it can calculate the cost of hedging for a variety of different withdrawal strategies by investors cases considered here include both optimal withdrawal strategies i e strategies which generate the highest possible cost of hedging for the insurer and sub optimal withdrawal strategies in which the policy holder s decisions depend on the moneyness of the embedded options numerical results are presented which demonstrate the sensitivity of the cost of hedging given the withdrawal specification to various economic and contractual assumptions

reducing the market impact of large shares of intermittent energy in denmark abstract the increasing prevalence of renewable and intermittent energy sources in the electricity system is creating new challenges for the interaction of the system in denmark high renewable shares have been achieved without great difficulty mainly due to the flexibility of the nearby nordic hydro power dominated system further increases in the share of renewable energy sources require that additional options are considered to facilitate integration with the lowest possible cost with large shares of intermittent energy the impact can be observed on wholesale prices giving both lower prices and higher volatility a lack of wind that causes high prices is rarely seen because long periods without wind are uncommon therefore we focus on the low price effects and the increased value of flexible demand options on the supply side there is an increase in the value of other flexible generation technologies and the attractiveness of additional interconnection capacity this paper also analyses options for increasing the flexibility of heat generation involving large and decentralized chp plants and heat generation based on electricity the incentives that the market provides for shifting demand and using electricity for heat production are discussed based on the variability of prices observed from 2006 to 2008

empirical analysis of the merit order effect and the missing money problem in power markets with high res shares an on going debate in the energy economics and power market community raises the question if energy only power markets are increasingly failing due to growing feed in shares from subsidized renewable energy sources res the argument being essentially that the merit order effect of res production depresses day ahead spot market prices which in turn creates a situation where power plant owners cannot recover investment costs missing money problem we argue in short that energy only power markets are not failing in principle but are rather facing several market distortions that hinder proper market functioning namely 1 the gap between the electricity volume actually traded at day ahead spot markets versus the overall electricity consumption and 2 the regulatory assumption that variable res generation i e wind and photovoltaic pv truly has zero marginal operation and grid integration costs in this paper we show that both effects over amplify the well known merit order effect of res power feed in and indirectly also the missing money problem beyond a level that is explainable by underlying physical realities we empirically analyze the impacts of wind and pv power feed in on the day ahead market for the epex german austrian market zone a region that is already today experiencing significant feed in tariff fit subsidized res power feed in ca 20 fit share our analysis shows that if necessary regulatory adaptations are taken i e increasing the spot market s share of overall load demand and using the true marginal costs of res units in the merit order energy based power markets remain functional despite high res power feed in

assessing the impact of wind generation on wholesale prices and generator dispatch in the australian national electricity market abstract growing climate change and energy security concerns are driving major wind energy deployment in electricity industries around the world despite its many advantages growing penetrations of this highly variable and somewhat unpredictable energy source pose new challenges for electricity industry operation one issue receiving growing attention is the so called merit order effect of wind generation in wholesale electricity markets wind has very low operating costs and therefore tends to displace higher cost conventional generation from market dispatch reducing both wholesale prices and conventional plant outputs this paper extends the current literature on this effect through an empirical study employing a range of econometric techniques to quantify the impacts of growing wind penetrations in the australian national electricity market nem the results suggest that wind is having a marked impact on spot market prices and while wind is primarily offsetting higher operating cost gas generation it is now also significantly reducing dispatch of emissions intensive brown coal generation great care needs to be taken in extrapolating these results to longer term implications however the study does propose a methodology for assessing this effect highlights the impacts that wind is already having on nem outcomes and suggests promising directions for future research

an empirical comparison of alternate regime switching models for electricity spot prices one of the most profound features of electricity spot prices are the price spikes markov regime switching mrs models seem to be a natural candidate for modeling this spiky behavior however in the studies published so far the goodness of fit of the proposed models has not been a major focus while most of the models were elegant their fit to empirical data has either been not examined thoroughly or the signs of a bad fit ignored with this paper we want to fill the gap we calibrate and test a range of mrs models in an attempt to find parsimonious specifications that not only address the main characteristics of electricity prices but are statistically sound as well we find that the most universal and robust structure is that of an independent spike 3 regime model with heteroscedastic diffusion type base regime dynamics and shifted spike regime distributions

efficient modeling and forecasting of electricity spot prices abstract the increasing importance of renewable energy especially solar and wind power has led to new forces in the formation of electricity prices hence this paper introduces an econometric model for the hourly time series of electricity prices of the european power exchange epex which incorporates specific features like renewable energy the model consists of several sophisticated and established approaches and can be regarded as a periodic var tarch with wind power solar power and load as influences on the time series it is able to map the distinct and well known features of electricity prices in germany an efficient iteratively reweighted lasso approach is used for the estimation moreover it is shown that several existing models are outperformed by the procedure developed in this paper

futures trading information and spot price volatility evidence for the ftse 100 stock index futures contract using garch abstract this paper examines the impact of trading in the ftse 100 stock index futures on the volatility of the underlying spot market to examine the relationship between information and volatility as subject neglected in previous studies the garch family of techniques is used the results suggest that futures trading has led to increased volatility but that the nature of volatility has not changed post futures the finding of price changes being integrated pre futures but being stationary post futures implies that the introduction of futures has improved the speed and quality of information flowing to the spot market

revisiting the relationship between spot and futures prices in the nord pool electricity market abstract this work discusses potential pitfalls of applying linear regression models for explaining the relationship between spot and futures prices in electricity markets in particular the bias coming from the simultaneity problem the effect of correlated measurement errors and the impact of seasonality on the regression results studying a 13 year long 1998 2010 price series of spot and futures prices at nord pool and employing regression models with garch residuals we show that the impact of the water reservoir level on the risk premium is positive which is to be expected but contradicts the results of botterud et al 2010 we also show that after taking into account the seasonality of the water level the storage cost theory proposed by botterud et al 2010 to explain the behavior of convenience yield has only limited support in the data

how does germany s green energy policy affect electricity market volatility an application of conditional autoregressive range models abstract based on a dynamic model for the high low range of electricity prices this article analyses the effects of germany s green energy policy on the volatility of the electricity market using european energy exchange data from 2000 to 2015 we find rather high volatility in the years 2000 2009 but also that the weekly price range has significantly declined in the period following the year 2009 this period is characterised by active regulation under the energy industry law enwg the eu emissions trading directive etd and the renewable energy law eeg in contrast to the preceding period price jumps are smaller and less frequent especially for day time hours implying that current policy measures are effective in promoting renewable energies while simultaneously upholding electricity market stability this is because the regulations strive towards a more and more flexible and market oriented structure which allows better integration of renewable energies and supports an efficient alignment of renewable electricity supply with demand

regime switching in stochastic models of commodity prices an application to an optimal tree harvesting problem abstract this paper investigates whether a regime switching model of stochastic lumber prices is better for the analysis of optimal harvesting problems in forestry than a more traditional single regime model prices of lumber derivatives are used to calibrate a regime switching model with each of two regimes characterized by a different mean reverting process a single regime mean reverting process is also calibrated the value of a representative stand of trees and optimal harvesting prices are determined by specifying a hamilton jacobi bellman variational inequality which is solved for both pricing models using a implicit finite difference approach the regime switching model is found to more closely match the behavior of futures prices than the single regime model in addition analysis of a tree harvesting problem indicates significant differences in terms of land value and optimal harvest thresholds between the regime switching and single regime models

supply shocks and price adjustment in the world oil market understanding the impacts of transitory oil supply shocks on world oil prices is crucial to the evaluation of the economic impacts of shocks and the design of policy responses to address those impacts this paper integrates short run and long run approaches to oil price determination with particular emphasis on the two price structure of the world oil market with coexisting short term spot prices and long term contract prices even transitory shocks are shown to exhibit persistence effects on long term prices some implications for econometric models of the relationship between spot and contract prices are discussed

labour force participation by disabled males in canada the disabled are not necessarily unemployed although about a quarter of them report they are completely prevented from working a disabled person s decision to work or not depends on a variety of psychological social and economic as well as health factors this paper asks if canadian disability related insurance schemes discourage work it models and measures the impact of disability benefits on the work choice of disabled prime age males it finds that they amount to a significant work disincentive but better yet they likely save many disabled persons from unsuitable and or undesirable jobs

distributional costs of wind energy production in portugal under the liberalized iberian market regime abstract wind generation in portugal and spain has grown due to a decrease in technology cost and the availability of renewables electricity generation incentives there is a strong interconnection between spain s and portugal s transmission systems resulting in common prices in both countries however portuguese and spanish producers receive the incentives for producing wind based electricity that are specified in their own national policies resulting in different costs to rate payers in this paper we estimate the costs to portuguese rate payers associated with the current market design and policy incentives to do so we regress hourly spot electricity market prices as a function of hourly wind generation and estimate the resulting feed in tariff costs distributional effects over the various rate payer categories total costs for rate payer are at the minimum level if joint wind generation in portugal and spain increases by 5 5 from what it is today if wind generation increases much further then the costs increase due to the fit overcost increase if wind generation decreases from current levels then costs also increase due to the merit order effect furthermore we find that rate payer categories will endure different portions of the costs with an increase in wind generation penalizing predominantly 20 7 kva rate payers

pros and cons of exposing renewables to electricity market risks a comparison of the market integration approaches in germany spain and the uk abstract the article examines how renewable electricity res e producers are integrated into the electricity market under the support legislations and regulatory frameworks of germany spain and the uk focus is on wind power which faces the highest market integration challenge of all res e the analysis shows that the three countries follow contrasting approaches of exposing res e producers to the market risks of forward electricity markets balancing markets and system planning requirements risk exposure is highest in the uk and lowest in germany from a policy maker s perspective there is a trade off between a high risk and a low risk approach when res e face high market risks a higher level of financial support is required to stimulate res e development than in a low risk environment but the exposure to market risks may also give an incentive to make efficient use of the respective market thus limiting the indirect costs to society the special characteristics of wind energy however put natural limits to the response of wind power plants to market prices and locational price signals and will increasingly influence electricity markets and grid infrastructure these interdependencies should be recognised in the design of res e policies and market regulations

an options pricing approach to ramping rate restrictions at hydro power plants this paper investigates the impact of ramping rate restrictions imposed on hydro operations to protect aquatic ecosystems the optimal ramping decision is specified as an optimal control problem which results in a hamilton jacobi bellman hjb equation electricity prices are modelled as a regime switching stochastic process the optimal control is determined by solving the hjb equation numerically using a fully implicit finite difference approach with semi lagrangian time stepping the paper focuses on the effect of ramping restrictions on a hydro plant s value and optimal operations and provides an analysis of which factors cause ramping restrictions to have a greater or lesser impact on profitability it is shown that hydro plant value is negatively affected by ramping restrictions but the extent of the impact depends on key parameters which determine the desirability of frequent changes in water release rates interestingly for the case considered value is not sensitive to ramping restrictions over a large range of restrictions the results point to the importance of accurately modelling electricity prices in gauging the trade offs involved in imposing restrictions on hydro operators which may hinder their ability to respond to volatile electricity prices and meet peak demands

estimating the commodity market price of risk for energy prices the purpose of this paper is to estimate the market price of risk mpr for energy commodities the ratio of expected return to standard deviation the mpr sign determines whether energy forward prices are upward or downward biased predictors of expected spot prices we estimate mprs using spot and futures prices while accounting for the samuelson effect we find long term mprs generally positive and short term negative consistent with positive energy betas and hedging respectively in spot electricity markets mprs in day ahead prices agree with short dated futures our results relate risk premia to informed hedging decisions and futures prices to forecast expected prices

the merit order effect in the italian power market the impact of solar and wind generation on national wholesale electricity prices abstract italy promoted one of the most generous renewable support schemes worldwide which resulted in a high increase of solar power generation we analyze the italian day ahead wholesale electricity market finding empirical evidence of the merit order effect over the period 2005 2013 an increase of 1 gwh in the hourly average of daily production from solar and wind sources has on average reduced wholesale electricity prices by respectively 2 3 mwh and 4 2 mwh and has amplified their volatility the impact on prices has decreased over time in correspondence with the increase in solar and wind electricity production we estimate that over the period 2009 2013 solar production has generated higher monetary savings than wind production mainly because the former is more prominent than the latter however in the solar case monetary savings are not sufficient to compensate the cost of the related supporting schemes which are entirely internalized within end user tariffs causing a reduction of the consumer surplus while the opposite occurs in the case of wind

going onto invalidity benefit a study for women 1977 78 1983 84 the main form of state insurance for long term sickness in britain is invalidity benefit there has been a dramatic growth in the stock of claimants on this benefit since its introduction in 1971 a logit model is fitted to explain at the individual level the probability of entering invalidity benefit among over 50 000 women in 1977 8 and over 65 000 in 1983 4 demographic characteristics played a powerful role in this model pay and benefit rates were also significant married women s entry probabilities were highly sensitive to local labour market conditions and much more so than other population groups

the merit order effect a detailed analysis of the price effect of renewable electricity generation on spot market prices in germany the german feed in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies critics state that the costs for consumers are too high an important aspect to be considered in the discussion is the price effect created by renewable electricity generation this paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in germany the central aspect to be analysed is the impact of renewable electricity generation on spot market prices the results generated by an agent based simulation platform indicate that the financial volume of the price reduction is considerable in the short run this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits in the case of the year 2006 the volume of the merit order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers

solar feed in tariffs and the merit order effect a study of the german electricity market abstract this study investigates the merit order effect moe of the recent years implementation of solar power in germany market clearing electricity prices and production levels are compared for the years 2009 2011 and a model for the relationship between the electricity price and price sensitive electricity production is developed and applied to predict electricity prices in germany from july 2010 to july 2011 with and without solar electricity generation seg the results show that the seg has caused a 7 reduction in average electricity prices for this period the average daily maximum price and daily price variation are also found to decrease by 13 and 23 respectively when taking the moe into account the net consumer s cost of the solar feed in tariff fit system is found to be 23 less than the charge listed in the electricity bill the german fit policy for solar power has been subject to considerable public debate and a common argument brought up in disfavor of the system is the high cost for the consumers in this study we demonstrate the importance of including the moe when evaluating the total costs and benefits of the fit policy mechanism

futures trading and volatility in the gnma market futures markets for agricultural commodities have existed for well over 100 years recently there has been a major expansion of futures trading into nontraditional areas particularly interest bearing securities and foreign currenciesthe so called financial futures the introduction of exchange traded futures contracts for treasury bills gnma pass through certificates and other securities has created new hedging arbitrage and speculative opportunities for the investors issuers and dealers who are active in the cash markets for these securities futures trading has also opened these markets to participation by new classes of traders particularly private and smaller institutional investors through the process of arbitrage a financial futures market will be closely linked to the cash market for the underlying securities an important concern of the regulatory authorities is what effect opening a futures market is likely to have on an existing cash market the purpose of this paper is to analyze the impact of futures trading in government national mortgage association gnma passthrough certificates on price volatility in the cash market for these securities there are several major ways in which opening futures trading can increase efficiency and smooth price variations in a cash market most importantly futures provide a mechanism for those who buy and sell the actual security or commodity to hedge themselves against unfavorable price changes through the futures market risk can be spread across a large number of investors and transferred away from those hedging spot positions to professional speculators who are more willing and able to bear it this risk transfer may substantially improve the functioning of the spot market because it reduces the need to incorporate risk premia in cash market transactions to compensate for the risk of price fluctuations second futures market may increase the informational efficiency of a cash market since futures prices are determined in a unified highly visible market by traders who specialize in gathering and evaluating information the futures market is expected to be an efficient market in the sense that prices will reflect the best estimate of true future values given the information currently available if anything an informationally efficient futures market should lead to more efficient pricing in the cash market the importance of both of these effects will depend upon the structure of the existing cash market the more developed and integrated is the cash market the

resource extraction with a carbon tax and regime switching prices exercising your options this paper develops a model of a profit maximizing firm with the option to exploit a non renewable resource choosing the timing and pace of development the resource price is modelled as a regime switching process which is calibrated to oil futures prices a hamilton jacobi bellman equation is specified that describes the profit maximization decision of the firm the model is applied to a problem of optimal investment in a typical oils sands in situ operation and solved for critical levels of oil prices that would motivate a firm to make the large scale investment needed for oil sands extraction as well as to operate mothball or abandon the facility regime shifts can have an important effect on the optimal timing of investment and extraction the paper examines the effect of several carbon tax schemes on optimal timing of construction production and abandonment a form of green paradox is identified

market price of risk implied by asian style electricity options and futures in this paper we propose a jump diffusion type model which recovers the main characteristics of electricity spot price dynamics in the nordic market including seasonality mean reversion and spiky behavior we show how the calibration of the market price of risk to actively traded futures contracts allows for efficient valuation of nord pool s asian style options written on the spot electricity price furthermore we study the evolution of the market price of risk and the risk premium over a three year time period and compare the obtained results with those reported in the literature

managing volumetric risk of long term power purchase agreements abstract a negative dependence between wind power production and electricity spot price exists this is an important fact to consider for risk management of long term power purchase agreements ppas in this study we investigate this dependence by constructing a joint model using constant as well as time varying copulas we propose to use score driven models as marginal model for the spot price of electricity as these are more robust to extreme events compared to arma garch models we apply the new model to pricing and risk management of ppas and benchmark it against the arma garch specification our comparison shows that the score driven model results in a statistically significant improvement of predicting the value at risk var which is of high importance for risk management of long term ppas further comparing constant and time varying copulas we find that all time varying copulas are significantly better than their constant counterparts at predicting the var hence time varying copulas should be used in risk management of ppas

the economic implications of disability insurance in canada the article empirically estimates the effects of disability pensions provided under the canada quebec pension plans on the labor force participation rates of males aged 45 64 years two data sets are used one consists of pooled cross section annual time series data by province for the years 1975 83 the other consists of observations as of 1985 on 651 males in the specified age group naive estimation results from both sets of data suggest a large negative effect of pension income in the case of the micro data this effect becomes small and statistically nonsignificant when more sophisticated estimation methods are used

an ex post analysis of the effect of renewables and cogeneration on spanish electricity prices abstract growing concerns about climate change and energy dependence are driving specific policies to support renewable or more efficient energy sources such as cogeneration in many regions particularly in the production of electricity these policies have a non negligible cost and therefore a careful assessment of their impacts seems necessary in particular one of the most debated impacts is their effect on electricity prices for which there have been some ex ante studies but few ex post studies this article presents a full ex post empirical analysis by looking at use of technologies and hourly electricity prices for 2005 2009 in spain to study the effects that the introduction of renewable electricity and cogeneration has had on wholesale electricity prices it is particularly interesting to perform this study in spain where an active system of public support to renewables and cogeneration has led to a considerable expansion of these energy sources and electricity pricing is at the center of intense debate the paper reports that a marginal increase of 1 gwh of electricity production using renewables and cogeneration is associated with a reduction of almost 2 per mwh in electricity prices around 4 of the average price for the analyzed period

pricing german energiewende products intraday cap floor futures abstract in this paper we introduce a model for the pricing of german intraday cap floor futures introduced by the eex in 2015 we give a thorough overview of the german intraday market and in particular introduce the id3 price index which is the underlying for intraday cap floor futures to price these derivatives we propose a hull white model from interest rate theory with seasonality from futures prices we apply our theoretical results to market data and conduct an empirical analysis involving the initial fit and empirical distribution of intraday cap futures prices

contracting and price adjustment in commodity markets evidence from copper and oil this paper analyzes price adjustment in markets where trade takes place through both spot market and long term contract transactions the authors develop a model illustrating the role of the resulting two price system in describing price adjustment to transitory shocks persistence effects of these shocks on prices depends on inter alia the fraction of trades carried out through contracts the model is tested on price data from the world copper and crude oil markets econometric tests of the model provide support for the hypothesis that the increase in the importance of spot markets in copper and oil is associated with an increase in the speed of adjustment of spot prices to supply and demand disturbances copyright 1989 by mit press

balancing environmental protection and energy production in the federal hydropower licensing process the u s federal energy regulatory commission ferc must balance environmental protection of riverine resources with the nation s growing demand for power production every time it issues a hydroelectric license this paper models the bureaucratic agency s decision making process in issuing these licenses data on nearly 500 hydro power licenses issued from 1983 to 2005 are utilized it is discovered that legislative and institutional constraints are by far the largest influences on ferc s regulatory decisions implying that if the current allocation of surface water in the united states is considered inefficient the most effective way to alter this allocation is by passing new legislation or by implementing institutional reform at ferc

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

demand pull instruments and the development of wind power in europe a counterfactual analysis renewable energy technologies are called to play a crucial role in the reduction of greenhouse gas emissions since most of these technologies did not yet reach grid parity public policies have been implemented in order to foster their deployment the approach that has been privileged in europe is the demand pull approach that aims at creating a demand for these new technologies and at stimulating their diffusion this paper examines the effect of demand pull policies on the diffusion of onshore wind power technology in six european countries denmark france germany italy portugal and spain in a first step a micro founded model of diffusion is calibrated in order to replicate the observed diffusion of wind power in these six countries in a second step a counterfactual analysis is conducted by investigating several scenarios by taking into account the complex self sustained dynamics of diffusion and the learning spillovers that operate in the wind power sector we can derive several insights about demand pull policies first the impact of a demand pull policy on the diffusion of wind power is determined by the stage at which it comes to support it the effect seems to be stronger at the beginning of the diffusion second international spillovers do operate in the wind power sector these international spillovers however are not strong enough to foster the diffusion of wind power in a country having no demand pull support we can derive from these two statements that a strategy consisting in not implementing any demand pull policy with the expectation that international spillovers will reduce the cost of wind power and foster the diffusion of the technology that then shall become competitive is not a good option for a country targeting a high share of wind power in its energy mix

determinants of official opec crude prices the hypothesis of this paper is that crude oil like any other unfinished commodity is valued for the products derived from it the purpose is to offer an empirical explanation for changes in the crude price charged by the members of opec the model results show that the market clearing prices reported to prevail for petroleum products on the principal petroleum spot market at rotterdam are the primary determinants of changes in official crude prices a systematic relationship between offical and spot prices is argued to have prevailed since 1974 an appendix clarifies five types of data required for the model 13 references 4 tables

modeling the merit order curve of the european energy exchange power market in germany an updating study concerning the analysis and modeling of the european energy exchange power market in germany is urgently called for due to the dramatic transformations of the market in recent years based on careful data research this paper provides a consolidated and detailed view concerning the development of the market and its mechanisms this paper proposes a new analytical model of the merit order curve of the market the model is designed to capture the occurrences of negative prices it considers fuel prices and co2 prices and by taking into account the structural changes of the market such as the increasing energy in feed from renewable sources and the moratorium of nuclear power plants in germany the model is robust to these changes of market fundamentals the proposed merit order curve model constitutes a critical component in realistic fundamental models for the european energy exchange power market

imperfect tagging in social insurance programs abstract this paper derives the optimal benefit structure of an earnings insurance program when a characteristic or tag imperfectly identifies those unable to work with a two sided classification error the optimal program is a dual work incentive system with a work non work consumption differential maintained for the tagged and untagged just sufficient to induce the able in each group to work and with more generous payments to tagged than to untagged individuals of the same work status it includes premiums to program eligible individuals who work a price missing in the u s social security disability system and in earlier attempts to characterize the optimal disability program

renewable energy regulation and structural breaks an empirical analysis of spanish electricity price volatility abstract international experience proves that electricity prices have undergone major changes in volatility since the entry of green technologies the intermittency of renewable sources is one of the reasons for these changes as it leads to higher volatility in periods of higher participation by renewables we argue that the development of the regulatory system promoting renewable electricity also plays a crucial role we raise a question that deserves attention could an incentive scheme induce higher share of renewables and lower volatility simultaneously in this paper we conduct an empirical analysis with spanish data we analyze possible ensuing structural changes in spanish electricity spot price volatility from january 2002 to december 2017 we identify two structural breaks linked to important measures related to renewable electricity i the abolishment of the feed in tariff scheme and ii the establishment of a more market oriented regulation based on investment and operating costs we conclude that stable regulatory policies reduce volatility even though the presence of renewable sources is greater furthermore market based policy measures achieve lower volatility encouraging good integration of intermittent renewable electricity