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Structural analysis of electricity demand and supply interactions

Journal

Oxford Bulletin of Economics and Statistics

Subject

Management Science and Operations

Publishing details

Oxford Bulletin of Economics and Statistics 2010 Vol 72:6 p 827-856

Authors / Editors

Bunn D W;Fezzi C

Biographies

Derek Bunn

Publication Year

2010

Abstract

We specify a structural asymmetric vector error-correction model to identify and estimate the demand and supply functions in hourly day-ahead wholesale electricity markets. In doing so, we provide, inter alia, new insights into a well-established but unresolved issue concerning the extent of the demand elasticity to price in these markets. We show that whilst demand appears to be inelastic in the short-run, the quantity traded on the market is significantly influenced by the price level and responds to previous disequilibria in the supply curve through an asymmetric error-correction mechanism, reacting to a positive disequilibrium but not to a negative one.

Available on ECCH

No


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