Theoretic Modeling And Empirical Research Of Electricity Market With Spot And Futures Trade

In recent years, the power industry traditionally regarded as that with natural monopoly feature, has been undergoing a fundamental market reformation of deregulation and competition in many countries, in order to reduce the cost and price of monopoly industry and improve the social benefit. With the deep development of market reformation and operation, the trade forms and market types are gradually enriched. Under the condition that the electric spot trades are universally existed, the futures trades are widely developed and promoted. Thus,how to effectively investigate the economic and technical problems on the electricity market with the spot and futures trades is an important research topic in the market operation, especially for the power market of China whose reformation is carried out in its infancy stage.In this paper, by using the two research methods, i.e., theoretic modeling and empirical analysis, the static and dynamic problems on the electricity market with the spot and futures trades are comprehensively and systematically investigated with the help of the newest models and methods of the game theory, optimization theory and econometrics theory. The main aspects are carried out as follows.By introducing the concept of non-inferior Nash equilibrium, the optimization model for the non-inferior Nash equilibrium of spot market based on the Cournot game is proposed, in order to effectively describe the characteristics that both cooperation within each generation group and competition between the groups coexist and consider the inherent physical characteristics of power network. By using the nonlinear complementarity function to reformulate the KKT system of optimization problem, the non-inferior Nash equilibrium of electric spot market is solved simply and fast. On the basis of this model, the characteristics of non-inferior Nash equilibrium of electric spot market are discussed under the condition of congestion and non-congestion of power network. It is found that the production strategies of generation group are different under different operating conditions of power system.In the electricity market environment that the spot and futures trades coexist, the joint non-inferior Nash equilibrium model of the electric spot and futures market is proposed, in order to effectively investigate the problem on the competition and cooperation of generation groups in the futures and spot markets. The characteristics of the joint non-inferior Nash equilibrium of electric spot and futures market are analyzed in view of the condition of congestion and non-congestion of power network. It is found that the generation groups voluntarily participate in the futures trades in order to reduce the electricity price and restrain the market power of generation groups.The cointegration theory of econometrics is introduced to effectively handle the nonstationary electricity price, and the dynamic relationship between the electricity futures price and spot price is further investigated. The long-term cointegration relationship between the futures price and spot price is thoroughly exhibited. Based on the vector error correction (VECM) model, the forecast model of electricity futures price is proposed. This model integrates the long-term relationship and the short-term fluctuation in the electricity price time series, achieving high forecast precision.The panel data analysis methods are introduced to empirically investigate the cointegration and causality relationship between the electricity spot and futures prices by taking the panel data for the Nordic electricity market and PJM electricity market examples. The strong relative relationship between the spot market and futures market is further verified.The efficiency problem on the electricity futures market is systematically investigated from the three aspects, i.e., the market efficiency, the price discovery function and the hedge function by means of the. cointergration technique, the variance ratio and the Granger causality test methods, etc. For the electricity futures market, the efficiency test method based on the variance ratio, the function efficiency analysis method of price discovery based on the cointergration theory and the evaluation method of hedging ratio and performance based on the generalized autoregressive conditional heteroskedasticity are proposed. By the empirical research on the Nordic electricity futures market, it can be found that its operation is basically efficient, and the operation efficiency during year 2000-2003 is higher than that of year 1996-1999. Although there are some inefficient factors, the Nordic electricity futures market is gradually tending towards the mature.This paper tightly integrates the theoretic modeling and empirical analysis methods, and then investigates the characteristics of electricity market that the spot and futures trades coexist, in order to provide beneficial quantitative decision- making foundation and measure suggestion for the management and operation organization. The findings possess the theoretical value and actual significance to a certain degree for the healthy development of power market operation of China.