Testing for non-stationarity and cointegration allowing for the possibility of a structural break: an application to EuroSterling interest rates

In this paper we examine the order of integration of EuroSterling interest rates by employing techniques that can allow for a structural break under the null and/or alternative hypothesis of the unit-root tests. In light of these results, we investigate the cointegrating relationship implied by the single, linear expectations hypothesis of the term structure of interest rates employing two techniques, one of which allows for the possibility of a break in the mean of the cointegrating relationship. The aim of the paper is to investigate whether or not the interest rate series can be viewed as I(1) processes and furthermore, to consider whether there has been a structural break in the series. We also determine whether, if we allow for a break in the cointegration analysis, the results are consistent with those obtained when a break is not allowed for. The main results reported in this paper support the conjecture that the ‘short’ Euro-currency rates are characterised as I(1) series that exhibit a structural break on or near Black Wednesday, 16 September 1992, whereas the ‘long’ rates are I(1) series that do not support the presence of a structural break. The evidence from the cointegration analysis suggests that tests of the expectations hypothesis based on data sets that include the ERM crisis period, or a period that includes a structural break, might be problematic if the structural break is not explicitly taken into account in the testing framework.

Demand side management for the European Supergrid: occupancy variances of European single-person households

The prospect of a European Supergrid calls for research on aggregate electricity peak demand and Europe-wide Demand Side Management. No attempt has been made as yet to represent a time-related demand curve of residential electricity consumption at the European level. This article assesses how active occupancy levels of single-person households vary in single-person household in 15 European countries. It makes use of occupancy time-series data from the Harmonised European Time Use Survey database to build European occupancy curves; identify peak occupancy periods; construct time-related electricity demand curves for TV and video watching activities and assess occupancy variances of single-person households.

Assessing the impact of occupant behaviour on the electricity consumption for lighting and small power in office buildings

Lighting and small power will typically account for more than half of the total electricity consumption in an office building. Significant variations in electricity used by different tenants suggest that occupants can have a significant impact on the electricity demand for these end-uses. Yet current modelling techniques fail to represent the interaction between occupant and the building environment in a realistic manner. Understanding the impact of such behaviours is crucial to improve the methodology behind current energy modelling techniques, aiming to minimise the significant gap between predicted and in-use performance of buildings. A better understanding of the impact of occupant behaviour on electricity consumption can also inform appropriate energy saving strategies focused on behavioural change. This paper reports on a study aiming to assess the intent of occupants to switch off lighting and appliances when not in use in office buildings. Based on the Theory of Planned Behaviour, the assessment takes the form of a questionnaire and investigates three predictors to behaviour individually: 1) behavioural attitude; 2) subjective norms; 3) perceived behavioural control. The paper details the development of the assessment procedure and discusses preliminary findings from the study. The questionnaire results are compared against electricity consumption data for individual zones within a multi-tenanted office building. Initial results demonstrate a statistically significant correlation between perceived behavioural control and energy consumption for lighting and small power

Measuring significant variability characteristics: An assessment of three UK renewables

The variability of renewable energy is widely recognised as a challenge for integrating high levels of renewable generation into electricity systems. However, to explore its implications effectively, variability itself should first be clearly understood. This is particularly true for national electricity systems with high planned penetration of renewables and limited interconnection such as the UK. Variability cannot be considered as a distinct resource property with a single measurable parameter, but is a multi-faceted concept best described by a range of distinct characteristics. This paper identifies relevant characteristics of variability, and considers their implications for energy research. This is done through analysis of wind, solar and tidal current resources, with a primary focus on the Bristol Channel region in the UK. The relationship with electricity demand is considered, alongside the potential benefits of resource diversity. Analysis is presented in terms of persistence, distribution, frequency and correlation between supply and demand. Marked differences are seen between the behaviours of the individual resources, and these give rise to a range of different implications for system integration. Wind shows strong persistence and a useful seasonal pattern, but also a high spread in energy levels at timescales beyond one or two days. The solar resource is most closely correlated with electricity demand, but is undermined by night-time zero values and an even greater spread of monthly energy delivered than wind. In contrast, the tidal resource exhibits very low persistence, but also much greater consistency in energy values assessed across monthly time scales. Whilst this paper focuses primarily on the behaviour of resources, it is noted that discrete variability characteristics can be related to different system impacts. Persistence and predictability are relevant for system balancing, whereas statistical distribution is more relevant when exploring issues of asset utilisation and energy curtailment. Areas of further research are also identified, including the need to assess the value of predictability in relation to other characteristics.

Testing for bubbles in indirect property price cycles

Speculative bubbles are generated when investors include the expectation of the future price in their information set. Under these conditions, the actual market price of the security, that is set according to demand and supply, will be a function of the future price and vice versa. In the presence of speculative bubbles, positive expected bubble returns will lead to increased demand and will thus force prices to diverge from their fundamental value. This paper investigates whether the prices of UK equity-traded property stocks over the past 15 years contain evidence of a speculative bubble. The analysis draws upon the methodologies adopted in various studies examining price bubbles in the general stock market. Fundamental values are generated using two models: the dividend discount and the Gordon growth. Variance bounds tests are then applied to test for bubbles in the UK property asset prices. Finally, cointegration analysis is conducted to provide further evidence on the presence of bubbles. Evidence of the existence of bubbles is found, although these appear to be transitory and concentrated in the mid-to-late 1990s.

Activities related with electricity consumption in the Spanish residential sector: variations between days of the week, Autonomous Communities and size of towns

Nowadays the electricity consumption in the residential sector attracts policy and research efforts, in order to propose saving strategies and to attain a better balance between production and consumption, by integrating renewable energy production and proposing suitable demand side management methods. To achieve these objectives it is essential to have real information about household electricity demand profiles in dwellings, highly correlated, among other aspects, with the active occupancy of the homes and to the personal activities carried out in homes by their occupants. Due to the limited information related to these aspects, in this paper, behavioral factors of the Spanish household residents, related to the electricity consumption, have been determined and analyzed, based on data from the Spanish Time Use Surveys, differentiating among the Autonomous Communities and the size of municipalities, or the type of days, weekdays or weekends. Activities involving a larger number of houses are those related to Personal Care, Food Preparation and Washing Dishes. The activity of greater realization at homes is Watching TV, which together with Using PC, results in a high energy demand in an aggregate level. Results obtained enable identify prospective targets for load control and for efficiency energy reduction recommendations to residential consumers.

Electricity derivatives pricing with forward-looking information

In order to increase overall transparency on key operational information, power transmission system operators publish an increasing amount of fundamental data, including forecasts of electricity demand and available capacity. We employ a fundamental model for electricity prices which lends itself well to integrating such forecasts, while retaining ease of implementation and tractability to allow for analytic derivatives pricing formulae. In an extensive futures pricing study, the pricing performance of our model is shown to further improve based on the inclusion of electricity demand and capacity forecasts, thus confirming the general importance of forward-looking information for electricity derivatives pricing. However, we also find that the usefulness of integrating forecast data into the pricing approach is primarily limited to those periods during which electricity prices are highly sensitive to demand or available capacity, whereas the impact is less visible when fuel prices are the primary underlying driver to prices instead.

Bahrain's Formula-1 racing circuit: energy and environmental considerations

The Bahrain International Circuit (BIC) and complex, at latitude 26.00N and longitude 51.54E, was built in 483 days and cost 150 million US$. The circuit consists of six different individual tracks with a 3.66 km outer track (involving 10 turns) and a 2.55 km inner track (having six turns). The complex has been designed to host a variety of other sporting activities. Fifty thousand spectators, including 10,500 in the main grandstand, can be accommodated simultaneously. State-of-the art on-site media and broadcast facilities are available. The noise level emitted from vehicles on the circuit during the Formula-1 event, on April 4th 2004, was acceptable and caused no physical disturbance to the fans in the VIP lounges or to scholars studying at the University of Bahrain's Shakeir Campus, which is only 1.5 km away from the circuit. The sound-intensity level (SIL) recorded on the balcony of the VIP lounge was 128 dB(A) and was 80 dB(A) inside the lounge. The calculated SIL immediately outside the lecture halls of the University of Bahrain was 70 dB(A) and 65 dB(A) within them. Thus racing at BIC can proceed without significantly disturbing the academic-learning process. The purchased electricity demand by the BIC complex peaked (at 4.5 MW) during the first Formula-1 event on April 4th 2004. The reverse-osmosis (RO) plant at the BIC provides 1000 m(3) of desalinated water per day for landscape irrigation. Renewable-energy inputs, (i.e., via solar and wind power), at the BIC could be harnessed to generate electricity for water desalination, air conditioning, lighting as well as for irrigation. If the covering of the BIC complex was covered by adhesively fixed modern photovoltaic cells, then similar to 1.2 MW of solar electricity could be generated. If two horizontal-axis, at 150 m height above the ground, three 75m bladed, wind turbines were to be installed at the BIC, then the output could reach 4 MW. Furthermore, if 10,000 Jojoba trees (a species renowned for having a low demand for water, needing only five irrigations per year in Bahrain and which remain green throughout the year) are planted near the circuit, then the local micro-climate would be improved with respect to human comfort as well as the local environment becoming cleaner.

A refined parametric model for short term load forecasting

Abstract We present a refined parametric model for forecasting electricity demand which performed particularly well in the recent Global Energy Forecasting Competition (GEFCom 2012). We begin by motivating and presenting a simple parametric model, treating the electricity demand as a function of the temperature and day of the data. We then set out a series of refinements of the model, explaining the rationale for each, and using the competition scores to demonstrate that each successive refinement step increases the accuracy of the model’s predictions. These refinements include combining models from multiple weather stations, removing outliers from the historical data, and special treatments of public holidays.

The impact of liquidity on senior credit index spreads during the subprime crisis

This paper examines the effects of liquidity during the 2007–09 crisis, focussing on the Senior Tranche of the CDX.NA.IG Index and on Moody's AAA Corporate Bond Index. It aims to understand whether the sharp increase in the credit spreads of these AAA-rated credit indices can be explained by worse credit fundamentals alone or whether it also reflects a lack of depth in the relevant markets, the scarcity of risk-capital, and the liquidity preference exhibited by investors. Using cointegration analysis and error correction models, the paper shows that during the crisis lower market and funding liquidity are important drivers of the increase in the credit spread of the AAA-rated structured product, whilst they are less significant in explaining credit spread changes for a portfolio of unstructured credit instruments. Looking at the experience of the subprime crisis, the study shows that when the conditions under which securitisation can work properly (liquidity, transparency and tradability) suddenly disappear, investors are left highly exposed to systemic risk.

Assessing the benefits of domestic hot fill washing appliances

Washing machine and dishwasher appliance use accounts for approximately 10% of electricity demand in EU households. The majority of this demand is due to the operation of electric heating elements inside appliances. This paper investigates the potential benefits that can be realised by adding a hot fill connection to washing appliances, with respect to carbon emissions, demand side management and renewable energy integration. Initial laboratory testing of new hot and cold fill appliances has resulted in modifications to optimise hot fill intake, and a novel numerical model presents a method of characterising appliance electricity use in different configurations. In order to validate model findings and test the use of new hot fill appliances in situ, a pilot study has recorded appliances’ resource consumption at one-minute resolution in fourteen households. The addition of hot fill reduced the total dishwasher and washing machine electricity consumption by 38% and 67% respectively. Depending on how hot water is supplied to appliances it is estimated that hot fill use results in an annual household carbon saving of up to 147 kgCO2. Further to direct electricity reduction, hot fill appliances can offer a method of time shifting demand away from peak periods without inconveniencing occupants’ lifestyles.

Emergy-based sustainability assessment of different energy options for green buildings

It is necessary to minimize the environmental impact and utilize natural resources in a sustainable and efficient manner in the early design stage of developing an environmentally-conscious design for a heating, ventilating and air-conditioning system. Energy supply options play a significant role in the total environmental load of heating, ventilating and air-conditioning systems. To assess the environmental impact of different energy options, a new method based on Emergy Analysis is proposed. Emergy Accounting, was first developed and widely used in the area of ecological engineering, but this is the first time it has been used in building service engineering. The environmental impacts due to the energy options are divided into four categories under the Emergy Framework: the depletion of natural resources, the greenhouse effect (carbon dioxide equivalents), the chemical rain effect (sulphur dioxide equivalents), and anthropogenic heat release. The depletion of non-renewable natural resources is indicated by the Environmental Load Ratio, and the environmental carrying capacity is developed to represent the environmental service to dilute the pollutants and anthropogenic heat released. This Emergy evaluation method provides a new way to integrate different environmental impacts under the same framework and thus facilitates better system choices. A case study of six different kinds of energy options consisting of renewable and non-renewable energy was performed by using Emergy Theory, and thus their relative environmental impacts were compared. The results show that the method of electricity generation in energy sources, especially for electricity-powered systems, is the most important factor to determine their overall environmental performance. The direct-fired lithium-bromide absorption type consumes more non-renewable energy, and contributes more to the urban heat island effect compared with other options having the same electricity supply. Using Emergy Analysis, designers and clients can make better-informed, environmentally-conscious selections of heating, ventilating and air-conditioning systems.

The impact of location and type on the performance of Low-Voltage network connected Battery Energy Storage Systems

This paper assesses the impact of the location and configuration of Battery Energy Storage Systems (BESS) on Low-Voltage (LV) feeders. BESS are now being deployed on LV networks by Distribution Network Operators (DNOs) as an alternative to conventional reinforcement (e.g. upgrading cables and transformers) in response to increased electricity demand from new technologies such as electric vehicles. By storing energy during periods of low demand and then releasing that energy at times of high demand, the peak demand of a given LV substation on the grid can be reduced therefore mitigating or at least delaying the need for replacement and upgrade. However, existing research into this application of BESS tends to evaluate the aggregated impact of such systems at the substation level and does not systematically consider the impact of the location and configuration of BESS on the voltage profiles, losses and utilisation within a given feeder. In this paper, four configurations of BESS are considered: single-phase, unlinked three-phase, linked three-phase without storage for phase-balancing only, and linked three-phase with storage. These four configurations are then assessed based on models of two real LV networks. In each case, the impact of the BESS is systematically evaluated at every node in the LV network using Matlab linked with OpenDSS. The location and configuration of a BESS is shown to be critical when seeking the best overall network impact or when considering specific impacts on voltage, losses, or utilisation separately. Furthermore, the paper also demonstrates that phase-balancing without energy storage can provide much of the gains on unbalanced networks compared to systems with energy storage.

Space heating and hot water demand analysis of dwellings connected to district heating scheme in UK

To achieve CO2 emissions reductions the UK Building Regulations require developers of new residential buildings to calculate expected CO2 emissions arising from their energy consumption using a methodology such as Standard Assessment Procedure (SAP 2005) or, more recently SAP 2009. SAP encompasses all domestic heat consumption and a limited proportion of the electricity consumption. However, these calculations are rarely verified with real energy consumption and related CO2 emissions. This paper presents the results of an analysis based on weekly head demand data for more than 200 individual flats. The data is collected from recently built residential development connected to a district heating network. A methodology for separating out the domestic hot water use (DHW) and space heating demand (SH) has been developed and compares measured values to the demand calculated using SAP 2005 and 2009 methodologies. The analysis shows also the variance in DHW and SH consumption between both size of the flats and tenure (privately owned or housing association). Evaluation of the space heating consumption includes also an estimation of the heating degree day (HDD) base temperature for each block of flats and its comparison to the average base temperature calculated using the SAP 2005 methodology.

Is there a demand for sustainable offices? An analysis of UK business occupier moves (2006–2008)

‘Sustainable’ or ‘green’ commercial buildings are frequently seen as a growth sector in the property investment market. This research examines the emergence of sustainable commercial buildings in both the UK and overseas. The empirical part of the paper is based on a telephone survey of 50 UK corporate (private sector) occupiers taking leased and owner–occupied office space, which was carried out during the period of April to November 2008. The survey focused on actual moves made within the previous two years, or moves that were imminent during 2006–2008. The research suggests that although there is an emerging and increasing demand for sustainable offices in the UK, other factors such as location and availability of stock continue to remain more important than sustainability in determining occupiers’ final choice of office. Occupiers who moved to a Building Research Establishment Environmental Assessment Method (BREEAM)‐rated building, and were in business sectors with strong environmental and corporate responsibility policies, placed more emphasis on sustainability than other groups in the final choice of office, but location and availability remained paramount.