Browsing by Author "Videbeck, Steen"

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Open Access
Approaches to Assessing Market Power in Electricity Markets
(Te Herenga Waka—Victoria University of Wellington, 2003) Guthrie, Graeme; Videbeck, Steen
Steen Videbeck presented a half day seminar in September 2003, Measuring and developing the performance of New Zealand's power market.
Open Access
Assessing the Integration of Electricity Markets Using Principal Component Analysis: Network and Market Structure Effects
(Te Herenga Waka—Victoria University of Wellington, 2006) Evans, Lewis; Guthrie, Graeme; Videbeck, Steen
The major difficulties in assessing market power in electricity wholesale spot markets mean that great weight should be placed upon assessing market outcomes against the fundamental determinants of supply demand and competition. In this spirit we study whether the New Zealand market has been a national market or a set of local markets since its inception in 1996. Electricity markets generally have loop flows that require simultaneous assessment of prices at all nodes thereby limiting the informativeness of pair-wise nodal comparisons. We introduce principal component analysis to this application and show that it is a natural tool for the qualitative and quantitative assessment of the presence of local markets. We find that increased competition induced some separation into local markets that was eliminated by transmission enhancement and the introduction of generation downstream from the constrained circuits. For most of the period New Zealand has had one national market.
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Electricity spot price behavior: insights into the NZEM
(Te Herenga Waka—Victoria University of Wellington, 2004) Videbeck, Steen
This thesis uses the observed behavior of high frequency electricity spot prices to examine a range of issues in the New Zealand Electricity Market (NZEM). It develops a new approach which treats electricity delivered at different times of the day as different commodities. The analysis reveals intrinsic correlation properties that indicate the existence of distinct intra-day markets. As these properties have important implications for the stochastic modelling of high frequency electricity spot prices, a state space model is developed that preserves this intra-day market structure. The multiple commodity approach is then combined with factor analysis to investigate the integration of the NZEM. In a pool market, like the NZEM, competition is maximized when the market is integrated. The analysis suggests that, while there is evidence that the NZEM is susceptible to segment along North/South lines during certain periods, the overall economic significance of this segmentation is low.
Open Access
Electricity Spot Price Dynamics: Beyond Financial Models
(Te Herenga Waka—Victoria University of Wellington, 2004) Guthrie, Graeme; Videbeck, Steen
An increasing number of researchers attempt to model the behavior of electricity spot prices using statistical models commonly used to model financial asset prices. In this paper we reveal properties of electricity spot prices which such models cannot capture. Using six years of half-hourly price data from the New Zealand Electricity Market we find that the half-hourly trading periods fall naturally into five groups corresponding to the overnight off-peak the morning peak daytime off-peak evening peak and evening off peak. The prices in different trading periods within each group are highly correlated with each other yet the correlations between prices in different groups are lower. Models adopted from the modelling of security prices that are currently applied to electricity spot prices are incapable of capturing this behavior. We use a periodic autoregression to model prices instead showing that shocks in the peak periods are larger and less persistent than those in off peak periods and that they often reappear in the following peak period. In contrast shocks in the offpeak periods are smaller more persistent and die out (perhaps temporarily) during the peak periods. Current approaches to modelling spot prices cannot capture this behavior either.
Open Access
High Frequency Electricity Spot Price Dynamics: An Intra-day Markets Approach
(Te Herenga Waka—Victoria University of Wellington, 2002) Guthrie, Graeme; Videbeck, Steen
In this paper we develop a new approach to understanding the behavior of high frequency electricity spot prices. It treats electricity delivered at different times of the day as different commodities while recognizing that these commodities may be traded on a small number of intra-day markets. We first present a detailed analysis of the high frequency dynamics of prices at a key New Zealand node. Our analysis which includes the use of a periodic autoregression model supports the treating of electricity as multiple commodities and also reveals intrinsic correlation properties that indicate the existence of distinct intra-day markets. Conventional models cannot adequately capture properties that have important implications for derivative pricing and real options analysis. We therefore extend the literature by introducing a state space model of high frequency spot prices that preserves this intra-day market structure.
Open Access
A Primer on Information Markets
(Te Herenga Waka—Victoria University of Wellington, 2005) Boyle, Glenn; Videbeck, Steen
In 1988 the US Commodity Futures Trading Commission gave permission for the University of Iowa to begin operating the Iowa Electronic Market (IEM) thus ushering in the world's first information market (sometimes called a prediction market). Similar markets have subsequently appeared at the University of British Columbia and Vienna University of Technology. Outside the education sector firms such as Trade Exchange Network (tradesports.com) and a joint venture between Goldman Sachs and Deutsche Bank (economicderivatives.com) have set up public information markets while other firms such as Hewlett-Packard Lilly and Siemens have used information markets for internal purposes. Information markets are similar to standard derivatives markets in that they provide a mechanism for trading financial claims to future contingencies. However they differ in that first they are more accessible to small investors and second they offer markets on a wider range of events including politics sports legal weather business and entertainment. The increasing popularity of information markets reflects several factors. The university-based markets were initially designed to serve primarily as teaching and research tools by providing students and staff with the opportunity to study a trading environment that is more realistic than the typical laboratory setting but without the scale complexity and noise of real-world markets. More recently based on the proven ability of markets to gather and assimilate dispersed information the potential forecasting power of information markets has generated most interest.In this paper we describe the structure of some existing information marketsoutline their key features explain what they can be used for and assess theirpredictive ability. Finally we consider the possible advantages of setting up of an information market in New Zealand.