Modelling of Fuel- and Energy-Switching Prices by Mean-Reverting Processes and Their Applications to Alberta Energy Markets

Mathematics

Stéphane Goutte¹  Weiliang Lu²  Alexis Arrigoni²  Anatoliy Swishchuk² 

[1] CEMOTEV, University Paris-Saclay, Bâtiment Bréguet, 3 Rue Joliot Curie 2e ét, 91190 Gif-sur-Yvette, France;Department of Mathematics and Statistics, University of Calgary, Calgary, AB T2N 1N4, Canada;

关键词: alberta energy markets;    mean-reverting stochastic processes;    carbon pricing;    renewable energies;    fuel-switching;    levy process;   

DOI  :  10.3390/math9070709

来源: DOAJ

【 摘 要 】

This paper introduces a fuel-switching price to the Alberta market, which is designed for encouraging power plant companies to switch from coal to natural gas when they produce electricity; this has been successfully applied to the European market. Moreover, we consider an energy-switching price which considers power switch from natural gas to wind. We modeled these two prices using five mean reverting processes including a Regime-switching processes, Lévy-driven Ornstein–Uhlenbeck process and Inhomogeneous Geometric Brownian Motion, and estimate them based on multiple procedures such as Maximum likelihood estimation and Expectation-Maximization algorithm. Finally, this paper proves previous results applied to the Albertan Market where the jump modeling technique is needed when modeling fuel-switching data. In addition, it not only gives promising conclusions on the necessity of introducing Regime-switching models to the fuel-switching data, but also shows that the Regime-switching model is better fitted to the data.

【 授权许可】

Unknown