Aitor Ciarreta

Electricity consumption and economic growth in Spain

This article investigates linear and nonlinear causality between electricity consumption and economic growth in Spain for the period 1971 to 2005. We use the methodology of Toda and Yamamoto (1995) and Dolado and Lütkepohl (1996). We also apply the standard Granger causality test in a vector autoregression for the series in first differences. We find unidirectional linear causality running from real GDP to electricity consumption. By contrast, we find no evidence of nonlinear Granger causality between the series in either direction.

Economic growth and electricity consumption in 12 European countries: A causality analysis using panel data

We apply recent panel methodology to investigate the relationship between electricity consumption and real GDP for a set of 12 European Union countries using annual data for the period 1970–2004. Tests for panel unit roots, cointegration in heterogeneous panels and panel causality are employed. The results show a long-run relationship between the series. We estimate this relationship and test for causality. We find no shortrun causality in any direction. These results might help to design appropriate electricity consumption policies in the sample countries, as well as investment policies in interconnections to build a single European market for electricity.

Switching from Feed-in Tariffs to a Tradable Green Certificate Market

Feed-in tariffs have been the key support system for electricity from renewable sources in Spain and other European countries. However, given the growing criticism of this incentive scheme mainly due to its financial burden, the Spanish government has recently cancelled subsidies for any new electricity from renewable sources (RD-l 1/2012 2012). Since tariffs do not benefit from market signals, subsidies to some technologies may be either too high or too low to attain the regulator’s objectives. Existing literature on tradable green certificates suggests that a switch to a green certificates setup could be an efficient solution when substantial investments in renewable energy are already in place and technologies are at a mature stage. This chapter analyzes the implementation of a green certificates scheme as an instrument to foster renewables. We solve a sequential game where we analyze the interaction between the electricity pool and the tradable green certificates market. We focus on the retailer regulation design that would give lead to a decreasing green certificates demand and simulate the effect of such regulation on the price of certificates.

Volatility transmissions in the Spanish Intra-day electricity market

This paper analyzes the volatility transmissions between the different sessions of the Spanish Intraday electricity market for the period 2002-2013 using hourly prices. Based on the daily realized volatility and the organization of the market, volatility can only be transmitted from session 1 to 6 in chronological order, which allows to formulate six Autoregressive Distributed Lag models in which inference on volatility transmissions can be conducted. Within the Heterogenous Autoregressive Regression framework two different models are estimated. The first one (HAR-RV) explains the volatility in terms of its past, while the second (HAR-CV-JV) decomposes the volatility into continuous and jump components to capture extreme spikes. In-sample forecast criteria select HAR-CV-JV model for all Intraday sessions whereas out-of-sample criteria select HAR-RV.

Vertical Separation v. Independent Downstream Entry in the Spanish Electricity Network: An Experimental Approach

We present experimental results from a series of sessions organized using the Power Market simulator; a software designed to realistically replicate the Spanish Electricity Market. In the experiments reported here we compare the status quo to two alternative treatments which represent alternative market structures. In one of them, labeled as vertical separation, we assume that power generating firms and electricity distributors-endsuppliers belong to separate business groups. In the second, we study the effect of entry by independent end-suppliers. Both alternative scenarios dominate the status quo in terms of market efficiency, whereas the latter of them dominates the former.

Forecasting volatility in the EPEX market

This paper uses high-frequency intraday electricity prices from the EPEX market to estimate and forecast realised volatility. Variation is broken down into jump and continuous components using quadratic variation theory. Then several heterogeneous autoregressive models are estimated for the logarithmic and standard deviation transformations. GARCH structures are included in the error terms of the models when evidence of conditional heteroscedasticity is found. Model selection is based on various out-of-sample criteria. Under the logarithmic transformation the simplest model outperforms the rest. Under the standard deviation transformation, jump detection before model estimation is useful to improve forecasting.

Modelling Realized Volatility in Electricity Spot Prices: New Insights and Application to the Japanese Electricity Market

The paper analyzes volatility of the electricity prices in the Japanese day-ahead market using realized volatility. We use several jump tests to decompose total realized variation into jump and continuous components. Then, we estimate several HAR models that show the time-dependence structure of the volatility. Our results show that even though that market is narrow, it is relevant to identify jumps in volatility. Besides, modelling residuals improve estimation results. The time-dependent structure of the prices is present in volatility as well.

PROFITABLE STRATEGIC DELEGATION WITH CONJECTURAL VARIATIONS

Firms delegate strategic decisions to managers because they find it profitable to do so. In the product market, when agents make conjectures about the reaction of their rivals to marginal changes in their own strategies, the set of equilibriums can be enlarged with respect to the case of no conjectures. This paper takes a duopolistic linear market parameterization where firms selling differentiated products can delegate either price or output decisions to managers. We show that it is a dominant strategy for firms to delegate no matter whether firms are Cournot or Bertrand competitors, although the equilibrium is not necessarily efficient. Futhermore, in equilibrium Cournot competition is more profitable for firms than Bertrand competition. Finally, requiring consistency in conjectures yields the same outcome no matter what type of strategic interaction and managerial choice there is on the part of firms.

Collusion sustainability with optimal punishments and detection lags, with an application to a Cournot game

In this paper we characterize optimal punishments with detection lags when the market consists of n oligopolistic firms that compete a la Cournot. It is shown how in the presence of detection lags optimal punishments fail to restore cooperation as long as the number of lags increases. Moreover, collusion sustainability is difficult to achieve also if the number of firms is low.