Determinants of the wholesale prices of energy and ancillary services in the U.S. Midcontinent electricity market

J. ZARNIKAU, C.H. TSAI, Chi Keung WOO

Research output: Contribution to journalArticle

Abstract

This paper examines wholesale price behavior of energy and ancillary services (AS) in the day-ahead market (DAM) and real-time market (RTM) of the Midcontinent Independent System Operator (MISO), the second largest regional transmission organization in the U.S. Using hourly data for the period of 12/19/2013 to 12/30/2017, it estimates a system of 16 electricity price regressions that recognizes the interdependence of MISO's electricity products. Its key findings are: (1) MISO's regional DAM energy prices increase with the day-ahead forecasts of natural gas price and MISO's regional loads, PJM's DAM energy price at its MISO interface, and MISO's DAM AS requirements; (2) MISO's regional DAM energy prices decline with DAM schedules for nuclear and wind generation; (3) MISO's regional RTM energy prices increase with, but diverge from, MISO's regional DAM energy prices; (4) MISO's system-average DAM AS prices increase with MISO's system-average DAM energy price and procured amounts of AS; and (5) MISO's system-average RTM AS prices increase with MISO's system-average RTM energy price and system-average DAM AS prices. These findings imply that MISO can reduce its DAM and RTM prices for energy and AS by accelerating wind generation development, expanding demand-side-management, and easing inter-regional transmission congestion. Copyright © 2020 Elsevier Ltd. All rights reserved.
Original languageEnglish
Article number117051
JournalEnergy
Early online dateJan 2020
DOIs
Publication statusE-pub ahead of print - Jan 2020

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Real time systems
Electricity
Natural gas
Power markets
Demand side management

Citation

Zarnikau, J., Tsai, C. H., & Woo, C. K. (2020). Determinants of the wholesale prices of energy and ancillary services in the U.S. Midcontinent electricity market. Energy. Advance online publication. doi: 10.1016/j.energy.2020.117051

Keywords

  • Wholesale electricity prices
  • Day-ahead markets
  • Real-time markets
  • Efficient trading hypothesis
  • Merit order effect hypothesis
  • MISO