In this paper we study some dynamical features of electricity markets modelling demand and supply by means of a nonlinear cobweb model. We consider a demand function periodically perturbed to take into account the real world seasonalities (daily, weekly and yearly) while supply function can include a stochastic term that is able to encompass possible shocks like outages and plants unavailability. Using adaptive expectations we investigate the effects on equilibrium prices in a perturbed and in an unperturbed model considering peak and off-peak market configurations. The model we propose is based on a well known partial equilibrium model which is used to describe price dynamics of non-storable goods. The novelty we introduce is a sigmoid supply function and a periodically perturbed demand function. Our simulative investigations confirm that the model is able to reproduce several effects observed in real price dynamics. We also focus on how the dynamics can be influenced by altering some market rules set by regulators, like price caps and floors. In particular, we show that taking into account periodical perturbations in the demand function can lead to the anticipation, with respect to the classical model, of chaotic dynamics. Moreover, we study how the dynamic is influenced if negative prices are allowed.

Cavalli, F., Naimzada, A., Parisio, L., A cobweb model for electricity markets, in 2015 12th International Conference on the European Energy Market (EEM), (Lisbon; Portugal, 19-22 May 2015), IEEE Computer Society, N/A 2015: 1-5. [10.1109/EEM.2015.7216639] [http://hdl.handle.net/10807/85365]

A cobweb model for electricity markets

Cavalli, Fausto
Primo
;
2015

Abstract

In this paper we study some dynamical features of electricity markets modelling demand and supply by means of a nonlinear cobweb model. We consider a demand function periodically perturbed to take into account the real world seasonalities (daily, weekly and yearly) while supply function can include a stochastic term that is able to encompass possible shocks like outages and plants unavailability. Using adaptive expectations we investigate the effects on equilibrium prices in a perturbed and in an unperturbed model considering peak and off-peak market configurations. The model we propose is based on a well known partial equilibrium model which is used to describe price dynamics of non-storable goods. The novelty we introduce is a sigmoid supply function and a periodically perturbed demand function. Our simulative investigations confirm that the model is able to reproduce several effects observed in real price dynamics. We also focus on how the dynamics can be influenced by altering some market rules set by regulators, like price caps and floors. In particular, we show that taking into account periodical perturbations in the demand function can lead to the anticipation, with respect to the classical model, of chaotic dynamics. Moreover, we study how the dynamic is influenced if negative prices are allowed.
Inglese
2015 12th International Conference on the European Energy Market (EEM)
International Conference on the European Energy Market, EEM 2015
Lisbon; Portugal
19-mag-2015
22-mag-2015
978-1-4673-6692-2
IEEE Computer Society
Cavalli, F., Naimzada, A., Parisio, L., A cobweb model for electricity markets, in 2015 12th International Conference on the European Energy Market (EEM), (Lisbon; Portugal, 19-22 May 2015), IEEE Computer Society, N/A 2015: 1-5. [10.1109/EEM.2015.7216639] [http://hdl.handle.net/10807/85365]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10807/85365
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