Directional connectedness between the electricity prices and natural gas prices: evidence from Alberta’s electricity market

IF 2.3 Q2 BUSINESS, FINANCE

Studies in Economics and Finance Pub Date : 2024-07-09 DOI:10.1108/sef-04-2024-0203

Andrés Oviedo-Gómez, Sandra Milena Londoño-Hernández, Diego Fernando Manotas-Duque

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引用次数: 0

Abstract

Purpose

This study aims to assess volatility spillovers and directional connectedness between electricity (EPs) and natural gas prices (GPs) in the Canadian electricity market, based on a hydrothermal power generation market strongly dependent on exogenous variables such as fossil fuel prices and climatology factors.

Design/methodology/approach

The methodology is divided into two stages. First, a quantile vector autoregression model is used to evaluate the direction and magnitude of the influence between natural gas and electricity prices through different quantiles of their distributions. Second, a cross-quantilogram is estimated to measure the directional predictability between these prices. The data set consists of daily electricity and natural gas prices between January 2015 and December 2023.

Findings

The main finding shows that electricity prices are pure shock receivers of volatility from natural gas prices for the different quantiles. In this way, natural gas price fluctuations explain 0.20%, 0.98% and 22.72% of electricity price volatility for the 10th, 50th and 90th quantiles, respectively. On the other hand, a significant and positive correlation is observed in the high quantiles of the electricity prices for any natural gas price value.

Originality/value

The study described the risk to the electricity market caused by nonrenewable source price fluctuations and provided evidence for designing regulatory policies to reduce its exposure in Alberta, Canada. It also allows us to understand the importance of natural gas in the energy transition process and define it as the fundamental determinant of the electricity market dynamic.

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电价与天然气价格之间的定向关联性：阿尔伯塔省电力市场的证据

目的本研究旨在评估加拿大电力市场中电力价格（EPs）和天然气价格（GPs）之间的波动溢出效应和方向关联性，其基础是一个强烈依赖于化石燃料价格和气候因素等外生变量的水热发电市场。首先，使用量子向量自回归模型评估天然气和电力价格在不同量子分布下的影响方向和程度。其次，对交叉量纲图进行估算，以衡量这些价格之间的定向可预测性。数据集包括 2015 年 1 月至 2023 年 12 月期间的每日电力和天然气价格。主要发现表明，在不同的量级中，电力价格是天然气价格波动的纯粹冲击接收器。因此，天然气价格波动对第 10、50 和 90 百分位数电价波动的解释率分别为 0.20%、0.98% 和 22.72%。另一方面，在任何天然气价格值的电价高分位数中，都可以观察到显著的正相关性。原创性/价值该研究描述了不可再生资源价格波动对电力市场造成的风险，并为加拿大艾伯塔省设计监管政策以降低其风险提供了证据。研究还让我们了解了天然气在能源转型过程中的重要性，并将其定义为电力市场动态的基本决定因素。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Studies in Economics and Finance BUSINESS, FINANCE-

CiteScore

4.30

自引率

10.50%

发文量

期刊介绍： Topics addressed in the journal include: ■corporate finance, ■financial markets, ■money and banking, ■international finance and economics, ■investments, ■risk management, ■theory of the firm, ■competition policy, ■corporate governance.