This paper focuses on the characteristics of hourly electricity prices in day-ahead markets. In these markets, quotes for day-ahead delivery of electricity are submitted simultaneously for all hours in the next day. The same information set is used for quoting all hours of the day. The dynamics of hourly electricity prices does not behave as a time series process. Instead, these prices should be treated as a panel in which the prices of 24 cross-sectional hours vary from day to day. This paper introduces a panel model for hourly electricity prices in day-ahead markets and examines their characteristics. The results show that hourly electricity prices exhibit hourly specific mean-reversion and that they oscillate around an hourly specific mean price level. Furthermore, a block structured cross-sectional correlation pattern between the hours is apparent.

Day-ahead electricity prices, Panel models, Power markets
dx.doi.org/10.1016/j.eneco.2006.08.005, hdl.handle.net/1765/65986
Energy Economics
Erasmus Research Institute of Management

Huisman, R, Huurman, C, & Mahieu, R.J. (2007). Hourly electricity prices in day-ahead markets. Energy Economics, 29(2), 240–248. doi:10.1016/j.eneco.2006.08.005