Given the role electricity and natural gas sectors play in the North American economy,
an understanding of how markets for these commodities interact is important. This
dissertation independently characterizes the price dynamics of major electricity and
natural gas spot markets in North America by combining directed acyclic graphs with
time series analyses. Furthermore, the dissertation explores a generalization of price
difference bands associated with the law of one price.
Interdependencies among 11 major electricity spot markets are examined in
Chapter II using a vector autoregression model. Results suggest that the relationships
between the markets vary by time. Western markets are separated from the eastern
markets and the Electricity Reliability Council of Texas. At longer time horizons these
separations disappear. Palo Verde is the important spot market in the west for price
discovery. Southwest Power Pool is the dominant market in Eastern Interconnected
System for price discovery.
Interdependencies among eight major natural gas spot markets are investigated
using a vector error correction model and the Greedy Equivalence Search Algorithm in
Chapter III. Findings suggest that the eight price series are tied together through sixlong-run cointegration relationships, supporting the argument that the natural gas market
has developed into a single integrated market in North America since deregulation.
Results indicate that price discovery tends to occur in the excess consuming regions and
move to the excess producing regions. Across North America, the U.S. Midwest region,
represented by the Chicago spot market, is the most important for price discovery. The
Ellisburg-Leidy Hub in Pennsylvania and Malin Hub in Oregon are important for eastern
and western markets.
In Chapter IV, a threshold vector error correction model is applied to the natural
gas markets to examine nonlinearities in adjustments to the law of one price. Results
show that there are nonlinear adjustments to the law of one price in seven pair-wise
markets. Four alternative cases for the law of one price are presented as a theoretical
background. A methodology is developed for finding a threshold cointegration model
that accounts for seasonality in the threshold levels. Results indicate that dynamic
threshold effects vary depending on geographical location and whether the markets are
excess producing or excess consuming markets.
| Identifer | oai:union.ndltd.org:tamu.edu/oai:repository.tamu.edu:1969.1/2668 |
| Date | 01 November 2005 |
| Creators | Park, Haesun |
| Contributors | Bessler, David A., Mjelde, James W. |
| Publisher | Texas A&M University |
| Source Sets | Texas A and M University |
| Language | en_US |
| Detected Language | English |
| Type | Book, Thesis, Electronic Dissertation, text |
| Format | 2566953 bytes, electronic, application/pdf, born digital |
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