Investigating the Impact of the Greek Electricity Market Reforms on its Day-Ahead Market Prices

Kalantzis, Fotis and Sakellaris, Kostis (2012): Investigating the Impact of the Greek Electricity Market Reforms on its Day-Ahead Market Prices.

Abstract

This empirical study assesses the impact of specific regulatory policy measures, adopted in the Greek wholesale electricity market during the period 2004-2011, on the Day-Ahead Market Price. We consider an ARMA-GARCH model extended to include dummies and other exogenous variables that affect market prices, such as RES and Hydro electricity production, as well as load volumes and Brent crude oil prices. In order to analyse the impact of the regulatory reforms on price and volatility dynamics, we include regime dummy variables, reflecting the timeline of these reforms. Based on the results, we discuss the impact of the examined reforms and their significance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Electricity Market, Greek Wholesale Market, Regulatory Reform, Day-Ahead Price, GARCH
• Subjects: L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics

References

[1] Steiner, F., “Regulation, industry structure and performance in the electricity supply industry”, OECD Economics Studies, OECD, 2001.

[2] Hattori, T. and M. Tsutsui, “Economic impact of regulatory reforms in the electricity supply industry: a panel data analysis for OECD countries”, Energy Policy 32 (6), 823–832, 2004.

[3] Schober, D., T. Nowakowski and C. Weber, “Political Reform in Electricity Markets – A Dynamic Panel Approach Applied to South America”, Energy Market, 2009. EEM 2009. 6th International Conference on the European , pp.1-11, 27-29 May 2009

[4] Erdogdu, E., “The impact of power market reforms on electricity price-cost margins and cross-subsidy levels: A cross-country panel data analysis”, Energy Policy 39 (3), 1080-1092, 2011.

[5] Bower, J., “Why did electricity prices fall in England and Wales? Market mechanism or market structure?”, Oxford Institute for Energy Studies Working Paper, EL 02, 2002.

[6] Fabra, N. and Toro, J. , “The fall in British electricity prices: market rules, market structure, or both?”, mimeo, Universidad Carlos III de Madrid, 2003.

[7] Evans, J. and Green, R., “Why did British electricity prices fall after 1998?”, Research Memorandum 35, University of Hul, 2003.

[8] Nogales F., Contreras, J., Conejo, A., and Espinola, R. “Forecasting Next-Day Electricity Prices by Time-Series Models”, IEEE Transactions on Power Systems 17 pp 342-348, 2002.

[9] Vehvilainen, I., and Pyykkonen, T. (2004) “Stochastic Factor Model for Electricity Spot Price - The Case of the Nordic Market”, Energy Economics, 27(2), 351-367, 2005.

[10] Petrella, A., Sapio A., “Assessing the impact of forward trading, retail liberalization, and white certificates on the Italian wholesale electricity prices”, Energy Policy, vol. 40, pp.307-317, 2012.

[11] Mount, T.D., Ning, Y., Cai, X., “Predicting Price Spikes in Electricity Markets Using a Regime-switching Model with Time-varying Parameters”, Energy Economics 28 pp 62-80, 2006

[12] Gianfreda, A., L. Grossi & D. Olivieri, “Volatility Structures of the Italian Electricity Market: An Analysis of Leverage and Volume Effects”, Energy Market, 2010, EEM 2010, 7th International Conference on the European , pp.1-6, 23-25 June 2010.

[13] Wolak, F., “Market Design and Price Behaviour in Restructured Electricity Markets: An International Comparison”, Pricing in Competitive Electricity Markets, Topics in Regulatory Economics and Policy Series, Vol. 36 (III), 127-152, 2000.

[14] Bower, J., and Bunn, D.W. “Experimental Analysis of the Efficiency of Uniform-Price versus Discriminatory Auctions in the England and Wales Electricity Market”, Journal of Economic Dynamics and Control , 25, pp 561-592, 2001.

[15] Karakatsani, N. and Bunn, D.W., “Fundamental and Behavioural Drivers of Electricity Price Volatility”, Studies in Nonlinear Dynamics & Econometrics, Vol. 14(4), Article 4 , 2010.

[16] Theodorou, P. & D. Karyampas, “Modeling the return and volatility of the Greek electricity marginal system price.”, Energy Policy 36 (7), 2601–2609, 2008.

[17] Illiadou, E., “Electricity Sector Reform in Greece”, Utilities Policy 17 (1), 76-87, 2009.

[18] Andrianesis, P., P. Biskas, G. Liberopoulos, “An overview of Greece's wholesale electricity market with emphasis on ancillary services.”, Electric Power Systems Research 81 (8), 1631-1642, 2011

[19] Sakellaris, K., “The Greek capacity adequacy mechanism: design, incentives, strategic behavior and regulatory remedies”, Energy Market, 2009. EEM 2009. 6th International Conference on the European , pp.1-6, 27-29 May 2009

[20] Annual National Reports to the European Commission, RAE, http://www.energy-regulators.eu/

[21] Hellenic Transmission System Operator website, www.desmie.gr

[22] Lucia, J. and E. Schwartz, “Electricity prices and power derivatives: evidence from the Nordic Power Exchange”, Review of Derivatives Research, vol. 5, pp.5-50, 2002.

[23] Worthington A., K.A. Spratley and H. Higgis, “Transmission of prices and price volatility in Australian electricity spot markets: a multivariate Garch analysis”, Energy Economics, vol. 27, pp.337-350, 2005.

[24] Karakatsani, N., and D.W. Bunn, “Forecasting electricity prices: The impact of fundamentals and time-varying coefficients”, International Journal of Forecasting, vol. 24(4), pp.764-785, 2008.

[25] Pilipovic D., “Energy risk: Valuing and managing energy derivatives”, McGraw-Hill, New York, 1998, ch. 4.