Improving electricity market price scenarios by means of forecasting factor models

In liberalized electricity markets, generation Companies must build an hourly bidthat is sent to the market operator. The price at which the energy will be paid is unknown during the bidding process and has to be forecast. In this work we apply forecasting factor models to this framework and study its suitability.

Composition of electricity generation portfolios, pivotal dynamics and market prices

We use a simulation model to study how the diversification of electricity generation portfoliosinfluences wholesale prices. We find that technological diversification generally leads to lower market prices but that the relationship is mediated by the supply to demand ratio. In each demand case there is a threshold where pivotal dynamics change. Pivotal dynamics pre- and post-threshold are the cause of non-linearities in the influence of diversification on market prices. The findings are robust to our choice of behavioural parameters and match close-form solutions where those are available.

Competition with forward contracts: a laboratory analysis motivated by electricity market design

We use experiments to study the efficiency effects for a market as a whole of adding the possibility of forward contracting to a pre-existing spot market. We deal separately with the cases where spot market competition is in quantities and where it is in supply functions. In both cases we compare the effect of adding a contract market with the introduction of an additional competitor, changing the market structure from a triopoly to a quadropoly. We find that, as theory suggests, for both types of competition the introduction of a forward market significantly lowers prices. The combination of supply function competition with a forward market leads to high efficiency levels.

Demand elasticity and market power in the spanish electricity market

In this paper we check whether generator's bid behavior at the Spanish whosale electricity market is consistent with the hypothesis of profit maximization on their residual demands. Using OMEL data, we find the arc-elacticity of the residual demand around the system marginal price. The results suggest thet the larger firms are not actually profit-msximization. We argue how the regulatory environment may drive these results. Finally, we repeat the analysis for the first session of the intra-day market where presumably firms may not have the same incentives as in the day-ahead market.

The effectiveness of market intervention policies to improve diet quality and to reduce the prevalence of obesity in Spain

Our project aims at analyzing the relevance of economic factors (mainly income and other socioeconomic characteristics of Spanish households and market prices) on the prevalence of obesity in Spain and to what extent market intervention prices are effective to reduce obesity and improve the quality of the diet, and under what circumstances. In relation to the existing literature worldwide, this project is the first attempt in Spain trying to get an overall picture on the effectiveness of public policies on both food consumption and the quality of diet, on one hand, and on the prevalence of obesity on the other. The project consists of four main parts. The first part represents a critical review of the literature on the economic approach of dealing with the obesity prevalence problems, diet quality and public intervention policies. Although another important body of obesity literature is dealing with physical exercise but in this paper we will limit our attention to those studies related to food consumption respecting the scope of our study and as there are many published literature review dealing with the literature related to the physical exercise and its effect on obesity prevalence. The second part consists of a Parametric and Non-Parametric Analysis of the Role of Economic Factors on Obesity Prevalence in Spain. The third part is trying to overcome the shortcomings of many diet quality indices that have been developed during last decades, such as the Healthy Eating Index, the Diet Quality Index, the Healthy Diet Indicator, and the Mediterranean Diet Score, through the development of a new obesity specific diet quality index. While the last part of our project concentrates on the assessment of the effectiveness of market intervention policies to improve the healthiness of the Spanish Diet Using the new Exact Affine Stone Index (EASI) Demand System.

Stochastic optimal bid to electricity markets with environmental risk constraints

There are many factors that influence the day-ahead market bidding strategies of a generation company (GenCo) in the current energy market framework. Environmental policy issues have become more and more important for fossil-fuelled power plants and they have to be considered in their management, giving rise to emission limitations. This work allows to investigate the influence of both the allowances and emission reduction plan, and the incorporation of the derivatives medium-term commitments in the optimal generation bidding strategy to the day-ahead electricity market. Two different technologies have been considered: the coal thermal units, high-emission technology, and the combined cycle gas turbine units, low-emission technology. The Iberian Electricity Market and the Spanish National Emissions and Allocation Plans are the framework to deal with the environmental issues in the day-ahead market bidding strategies. To address emission limitations, some of the standard risk management methodologies developed for financial markets, such as Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR), have been extended. This study offers to electricity generation utilities a mathematical model to determinate the individual optimal generation bid to the wholesale electricity market, for each one of their generation units that maximizes the long-run profits of the utility abiding by the Iberian Electricity Market rules, the environmental restrictions set by the EU Emission Trading Scheme, as well as the restrictions set by the Spanish National Emissions Reduction Plan. The economic implications for a GenCo of including the environmental restrictions of these National Plans are analyzed and the most remarkable results will be presented.

A comparison of stock market mechanisms

This paper studies the relationship between the amount of publicinformation that stock market prices incorporate and the equilibriumbehavior of market participants. The analysis is framed in a static, NREEsetup where traders exchange vectors of assets accessing multidimensionalinformation under two alternative market structures. In the first(the unrestricted system), both informed and uninformed speculators cancondition their demands for each traded asset on all equilibrium prices;in the second (the restricted system), they are restricted to conditiontheir demand on the price of the asset they want to trade. I show thatinformed traders incentives to exploit multidimensional privateinformation depend on the number of prices they can condition upon whensubmitting their demand schedules, and on the specific price formationprocess one considers. Building on this insight, I then give conditionsunder which the restricted system is more efficient than the unrestrictedsystem.

Are agent-based simulations robust? The wholesale electricity trading case

Agent-based computational economics is becoming widely used in practice. This paperexplores the consistency of some of its standard techniques. We focus in particular on prevailingwholesale electricity trading simulation methods. We include different supply and demandrepresentations and propose the Experience-Weighted Attractions method to include severalbehavioural algorithms. We compare the results across assumptions and to economic theorypredictions. The match is good under best-response and reinforcement learning but not underfictitious play. The simulations perform well under flat and upward-slopping supply bidding,and also for plausible demand elasticity assumptions. Learning is influenced by the number ofbids per plant and the initial conditions. The overall conclusion is that agent-based simulationassumptions are far from innocuous. We link their performance to underlying features, andidentify those that are better suited to model wholesale electricity markets.

Price competition under cost uncertainty: A laboratory analysis

We study the relation between the number of firms and price-cost margins under price competition with uncertainty about competitors' costs. We present results of an experiment in which two, three and four identical firms repeatedly interact in this environment. In line with the theoretical prediction, market prices decrease with the number of firms, but on average stay above marginal costs. Pricing is less aggressive in duopolies than in triopolies and tetrapolies. However, independently from the number of firms, pricing is more aggressive than in the theoretical equilibrium. Both the absolute and the relative surpluses increase with the number of firms. Total surplus is close to the equilibrium level, since enhanced consumer surplus through lower prices is counteracted by occasional displacements of the most efficient firm in production.

Aplicación de algunos modelos de series temporales al mercado de la electricidad en España

Hoy día, todo el mundo tiene un ojo puesto en el Mercado Eléctrico en nuestro país. No existe duda alguna sobre la importancia que tiene el comportamiento de la demanda eléctrica. Una de las peculiaridades de la electricidad que producimos, es que hoy por hoy, no existen aún métodos lo suficientemente efectivos para almacenarla, al menos en grandes cantidades. Por consiguiente, la cantidad demandada y la ofertada/producida deben casar de manera casi perfecta. Debido a estas razones, es bastante interesante tratar de predecir el comportamiento futuro de la demanda, estudiando una posible tendencia y/o estacionalidad. Profundizando más en los datos históricos de las demandas; es relativamente sencillo descubrir la gran influencia que la temperatura ambiente, laboralidad o la actividad económica tienen sobre la respuesta de la demanda. Una vez teniendo todo esto claro, podemos decidir cuál es el mejor método para aplicarlo en este tipo de series temporales. Para este fin, los métodos de análisis más comunes han sido presentados y explicados, poniendo de relieve sus principales características, así como sus aplicaciones. Los métodos en los que se ha centrado este proyecto son en los modelos de alisado y medias móviles. Por último, se ha buscado una relación entre la demanda eléctrica peninsular y el precio final que pagamos por la luz.

Security prices and market transparency: the role of prior information

This paper analyzes the role of traders' priors (proper versus improper) on the implications of market transparency by comparing a pre-trade transparent market with an opaque market in a set-up based on Madhavan (1996). We show that prices may be more informative in the opaque market, regardless of how priors are modelled. In contrast, the comparison of market liquidity and volatility in the two market structures are affected by prior specification. Key words: Market microstructure, Transparency, Prior information

Asymmetric demand information in uniform and discriminatory call auctions: an experimental analysis motivated by electricity markets

We study the outcomes of experimental multi-unit uniform and discriminatory auctions with demand uncertainty. Our study is motivated by the ongoing debate about market design in the electricity industry. Our main aim is to compare the effect of asymmetric demand-information between sellers on the performance of the two auction institutions. In our baseline conditions all sellers have the same information, whereas in our treatment conditions some sellers have better information than others. In both information conditions we find that average transaction prices and price volatility are not significantly different under the two auction institutions. However, when there is asymmetric information among sellers the discriminatory auction is significantly less efficient. These results are not in line with the typical arguments made in favor of discriminatory pricing in electricity industries; namely, lower consumer prices and less price volatility. Moreover, our results provide some indication that discriminatory auctions reduce technical efficiency relative to uniform auctions.

Double implementation in a market for indivisible goods with a price constraint

I consider the problem of assigning agents to objects where each agent must pay the price of the object he gets and prices must sum to a given number. The objective is to select an assignment-price pair that is envy-free with respect to the true preferences. I prove that the proposed mechanism will implement both in Nash and strong Nash the set of envy-free allocations. The distinguishing feature of the mechanism is that it treats the announced preferences as the true ones and selects an envy-free allocation with respect to the announced preferences.

Imperfect competition and market liquidity with a supply informed trader

We develop a model of insider trading where agents have private information either about liquidation value or about supply and behave strategically to maximize their profits. The supply informed trader plays a dual role in market making and in information revelation. This trader not only reveals a part of the information he owns, but he also induces the other traders to reveal more of their private information. The presence of different types of information decreases market liquidity and induces non-monotonicity of the market indicators with respect to the variance of liquidation value. Replacing the noise introduced by liquidity traders with a random supply also allows us to study the effect the shocks on different components of supply have on prices and quantities.

Reference prices: the spanish way

The aim of this paper is to analyse the effects of recent regulatory reforms that Spanish Health Authorities have implemented in the pharmaceutical market: the introduction of a reference price system together with the promotion of generic drugs. The main objectives of these two reforms are to increase price competition and, ultimately, reduce pharmaceutical costs. Before the introduction of reference prices, consumers had to pay a fixed copayment of the price of whatever drug purchased. With the introduction of such system, the situation differs in the following way: if (s)he buys the more expensive branded drug, then (s)he pays a sum of two elements: the copayment associated to the reference price plus the difference between the price of this good and the reference price. However, if the consumer decides to buy the generic alternative, with price lower than the reference price, then (s)he has to pay the same copayment as before. We show that the introduction of a reference price system together with the promotion of generic drugs increase price competition and lower pharmaceutical costs only if the reference price is set in a certain interval. Also profits for the duopolists might be reduced. These results are due to the opposing effects that reference prices have on branded and generic producers respectively.