Three Essays on Electricity Prices

Abstract

The thesis explores how the Nord Pool power market prices forward-looking information. Specifically, the thesis investigates the efficiency, or the biasedness, of the derivatives side of the power market, how temperature is priced by the market, and how to account for uncertainty in future information. The thesis consists of an introductory chapter which comprises the context and background for the three studies, including a summary. Using data on current and future-looking information from futures prices, the thesis brings new evidence on how the efficiency of the futures market at Nord Pool has developed. Furthermore, the thesis investigates relationship between the relationship between temperature and power prices and the price forecasting information implied in weather forecasts.

The thesis provides new insight into the effect of future looking information on the electricity spot prices. The findings indicate that futures on the Nord Pool spot price has been unbiased estimates of the future spot price since 2008. Furthermore, the effect of temperature on price were investigated and were found to be seasonally dependent, different across Norwegian price zones, and different across price quantiles. Also, the information from temperature forecasts is beneficial to use in price forecasts for up to 9 days ahead, but the uncertainty in temperature forecasts has to be accounted for.