Electricity Price Volatility and the Marginal Cost of Congestion: An Empirical Study of Peak Hours on the NYISO Market, 2001-2004

Hadsell, Lester; Shawky, Hany A.
April 2006
Energy Journal;2006, Vol. 27 Issue 2, p157
Academic Journal
We examine the volatility characteristics of the NYISO Day Ahead and Real Time electricity markets for peak hours from January 2001 to June 2004. GARCH models are used to study the differences in volatility across zones. We find that price volatility is higher but less persistent in the Real Time market than in the Day Ahead market. Furthermore, we document the importance of transmission congestion and empirically estimate its impact on volatility in electricity prices. We also examine the Day Ahead premium and show how it is related to volatility in Real Time prices. The implications for participants in these markets are discussed.


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