Abstract
In this chapter we develop a bid-based stochastic model (BSM) of the evolution of prices on electricity spot markets [19]. We assume that the spot market operates as a double auction, with a single hourly market clearing price (MCP) at the intersection of the aggregate supply and demand bid curves.. The model can be modified to account for variations in the auction procedure. We design the model to be applicable to hedging, speculation or investment decisions in electricity markets. As such, it focuses on quantifying the uncertainty of future price movements. We have used a fundamental modeling approach, where the fundamental drivers are load and supply shifts. The model captures the most critical characteristics of demand (load) and supply, as outlined below, in the electricity market.
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© 2001 Springer Science+Business Media New York
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Skantze, P.L., Ilic, M.D. (2001). A Bid-based Stochastic Model for Electricity Prices. In: Valuation, Hedging and Speculation in Competitive Electricity Markets. The Springer International Series in Engineering and Computer Science. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-1701-6_6
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DOI: https://doi.org/10.1007/978-1-4615-1701-6_6
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-5685-1
Online ISBN: 978-1-4615-1701-6
eBook Packages: Springer Book Archive