COMPARING THE SPOT PRICES FROM POWERNEXT AND EEX

Marg

Description

Niveau: Supérieur, Doctorat, Bac+8
COMPARING THE SPOT PRICES FROM POWERNEXT AND EEX By Alain Galli & Margaret Armstrong Quantitative Finance Group, Cerna Ecole des Mines de Paris Introduction Powernext started operating on 27 November 2001. Although the German exchange, EEX, has been functioning for much longer, the two have many common points. Both use the same system for fixing the day-ahead spot price, the one developed by NordPool. In contrast to Omel in Spain, power producers in France and Germany are not obliged to sell through the exchange. In addition, the cross- border transmission lines that physically link the French and German grids, not only make the electricity supply more reliable they also allow cross-border commercial transactions which should homogenize prices in both countries. So after nearly a year of operation it is interesting to compare the spot prices on the two exchanges in order to have a better understanding of the statistical properties of the prices in the two markets and the relationship between them. This information will be used when modelling the structure of the day-ahead spot prices. The data used to carry out the study consists of the (hourly) spot prices for electricity from Powernext and EEX, for the period from 1 January 2002 to 2 December 2002. Data from the first five weeks of trading were not included because traded volumes were relatively low initially and so these data are not necessarily representative.

• powernext


• hourly average prices


• spot prices


• rather than using


• eex


• time series


• scatter diagram between


• daily mean

Sujets

• Mines ParisTech
• Spain
• Armstrong
• Powernext
• Time series

Informations

• Publié par: profil-zyak-2012
• Nombre de lectures: 29
• Langue: English

Extrait

COMPARING THE SPOT PRICES FROM POWERNEXT AND EEX

By Alain Galli & Margaret Armstrong

Quantitative Finance Group, Cerna

Ecole des Mines de Paris

[e-mail]

[e-mail]

Introduction

Powernext started operating on 27 November 2001. Although the German exchange, EEX, has been

functioning for much longer, the two have many common points. Both use the same system for fixing

the day-ahead spot price, the one developed by NordPool. In contrast to Omel in Spain, power

producers in France and Germany are not obliged to sell through the exchange. In addition, the cross-

border transmission lines that physically link the French and German grids, not only make the

electricity supply more reliable they also allow cross-border commercial transactions which should

homogenize prices in both countries. So after nearly a year of operation it is interesting to compare the

spot prices on the two exchanges in order to have a better understanding of the statistical properties of

the prices in the two markets and the relationship between them. This information will be used when

modelling the structure of the day-ahead spot prices.

The data used to carry out the study consists of the (hourly) spot prices for electricity from Powernext

and EEX, for the period from 1 January 2002 to 2 December 2002. Data from the first five weeks of

trading were not included because traded volumes were relatively low initially and so these data are

not necessarily representative.

This report is divided into four sections. The first one presents the basic statistics, starting with the

histograms of all the 8064 spot prices in the 336 days, for both exchanges. In time series data, it is

usual to find three types of seasonality: daily, weekly and annual. As the available data cover less than

one calendar year, it is too early to attempt to study annual trends. So we limit ourselves to studying

daily and weekly fluctuations. Plotting the hourly average prices for each day of the week shows some

interesting differences between Powernext and EEX, as well as a high degree of similarity. The second

section studies the time correlations between the two time series. Rather than using auto and cross

correlations which are sensitive to the estimate of the mean, we have chosen to use variograms. The

third section focuses on the buy and sell curves that effectively determine the spot prices. Some

preliminary conclusions are given in the fourth section.

Basic statistics

A) Day by day comparisons

Figure 1 shows the daily mean spot prices for Powernext (blue) and EEX (red), together with the

difference between these two values (green) for the period from 1 January to 2 December 2002. In

order to be able to display the latter, eighty has been added to the difference. The similarity between

the two series of prices is striking. Both have periods of extremely high prices. During these periods

the EEX prices are more variable than those of Powernext. During the cold snap from 17 to 19

December 2001 (not shown in Figure 1), prices on both exchanges skyrocketed, with EEX hitting a

maximum of 1000€ per MWH compared to 450€ for Powernext. At this time winter conditions were

exacerbated by problems with the international transmission lines.