Template-Type: ReDIF-Article 1.0
Author-Name:  Nikolaos S. Thomaidis
Author-Name: Gordon H. Dash
Author-Name: Nina Kajiji
Title:  Common Unobserved Determinants of Intraday Electricity Prices
Classification-JEL: F0
Volume:  Volume 40
Issue:  The New Era of Energy Transition
Year:  2019
Abstract:  This paper employs multilevel factor modelling techniques to unravel systematicunobserved determinants of the intraday and interzonal price curve dynamics forthe Pennsylvania-New Jersey-Maryland (PJM) interconnection. These techniquesmake an explicit separation of global drivers from region-specific common factors, thereby facilitating the identification of the actual sources of co-variability.Our empirical findings confirm the hypothesis that the common unobserved determinants of power prices in the PJM interconnection obey a block structure, someof which affect different segments of our panel. We argue that a multilevel factorapproach offers a more systematic and transparent representation of intertemporal and cross-sectional patterns in PJM electricity prices compared to alternativebrute-force VARMAX parametrizations and the single-level factor models, whichare often put forward in the literature as viable modelling alternatives.
Handle: RePEc:aen:journl:ej40-si1-Thomaidis
File-URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=3309
File-Format: text/html
File-Restriction: Access to full text is restricted to IAEE members and subscribers.