scholarly journals Examination of the Spillover Effects among Natural Gas and Wholesale Electricity Markets Using Their Futures with Different Maturities and Spot Prices

Energies ◽  
2020 ◽  
Vol 13 (7) ◽  
pp. 1533
Author(s):  
Tadahiro Nakajima ◽  
Yuki Toyoshima
Keyword(s):  
Natural Gas ◽  
Electricity Markets ◽  
Futures Markets ◽  
Spillover Effects ◽  
Futures Market ◽  
Spot Markets ◽  
Electricity Prices ◽  
Spot Prices ◽  
Natural Gas Prices ◽  
Gas Price

This study measures the connectedness of natural gas and electricity spot returns to their futures returns with different maturities. We employ the Henry Hub and the Pennsylvania, New Jersey, and Maryland (PJM) Western Hub Peak as the natural gas price indicator and the wholesale electricity price indicator, respectively. We also use each commodity’s spot prices and 12 types of futures prices with one to twelve months maturities and realize results in fourfold. First, we observe mutual spillover effects between natural gas futures returns and learn that the natural gas futures market is integrated. Second, we observe the spillover effects from natural gas futures returns to natural gas spot returns (however, the same is not evident for natural gas spot returns to natural gas futures returns). We find that futures markets have better natural gas price discovery capabilities than spot markets. Third, we observe the spillover effects from natural gas spot returns to electricity spot returns, and the spillover effects from natural gas futures returns to electricity futures returns. We learn that the marginal cost of power generation (natural gas prices) is passed through to electricity prices. Finally, we do not observe any spillover effects amongst electricity futures returns, except for some combinations, and learn that the electricity futures market is not integrated.

scholarly journals Energy Market Prices in Times of COVID-19: The Case of Electricity and Natural Gas in Spain

Energies ◽  
2021 ◽  
Vol 14 (6) ◽  
pp. 1632
Author(s):  
Luis M. Abadie
Keyword(s):  
Natural Gas ◽  
Probability Distributions ◽  
Energy Market ◽  
Strong Impact ◽  
Electricity Prices ◽  
Market Prices ◽  
Spanish Society ◽  
Spot Prices ◽  
Natural Gas Prices ◽  
Almost All

The COVID-19 pandemic is having a strong impact on the economies of all countries, negatively affecting almost all sectors. This paper compares Spanish electricity and natural gas prices in the first half-year of 2020 with the prices expected for that period at the end of 2019. The half-year of 2020 selected coincides with the period of greatest impact of COVID-19 on Spanish society. Expected prices and their future probability distributions are calculated using a stochastic model with deterministic and stochastic parts; the stochastic part includes mean-reverting and jumps behaviour. The model is calibrated with 2016–2019 daily spot prices for electricity and with day-ahead prices for natural gas. The results show large monthly differences between the prices expected at the end of the year 2019 and the actual prices for the half-year; in May 2020, wholesale electricity prices are found to be EUR 31.60/MWh lower than expected, i.e., 60% lower. In the case of natural gas, the prices in the same month are EUR 8.96/MWh lower than expected, i.e., 62% lower. The spark spread (SS) is positive but lower than expected and also lower than in the same months of the previous year.

Price discovery and volatility spillover: an empirical evidence from spot and futures agricultural commodity markets in India

2020 ◽  
Vol 10 (4) ◽  
pp. 447-473 ◽  
Author(s):  
Manogna R L ◽  
Aswini Kumar Mishra
Keyword(s):  
Granger Causality ◽  
Futures Markets ◽  
Price Discovery ◽  
Spillover Effects ◽  
Futures Market ◽  
Commodity Markets ◽  
Volatility Spillover ◽  
Agricultural Commodity ◽  
Content Type ◽  
Spot Prices

PurposePrice discovery and spillover effect are prominent indicators in the commodity futures market to protect the interest of consumers, farmers and to hedge sharp price fluctuations. The purpose of this paper is to investigate empirically the price discovery and volatility spillover in Indian agriculture spot and futures commodity markets.Design/methodology/approachThis study uses Granger causality, vector error correction model (VECM) and exponential generalized autoregressive conditional heteroskedasticity (EGARCH) to examines the price discovery and spillover effects for nine most liquid agricultural commodities in spot and futures markets traded on National Commodity and Derivatives Exchange (NCDEX).FindingsThe VECM results show that price discovery exists in all the nine commodities with futures market leading the spot in case of six commodities, namely soybean seed, coriander, turmeric, castor seed, guar seed and chana. Whereas in case of three commodities (cotton seed, rape mustard seed and jeera), price discovery takes place in the spot market. The Granger causality tests indicate that futures markets have stronger ability to predict spot prices. Supporting these, the results from EGARCH volatility test reveal that there exist mutual spillover effects on futures and spot markets. Thus, it could be inferred that futures market is more efficient in price discovery of agricultural commodities in India.Research limitations/implicationsThese results can help the market participants to benefit by hedging out the uncertainty and the policymakers to design futures contracts to improve the efficiency of the agricultural commodity derivatives market.Practical implicationsThe findings provide fresh view on lead–lag relationship between future and spot prices using the latest data confirming that futures market indeed is dominant in price discovery.Originality/valueThere are very few studies that have explored the efficiency of the agricultural commodity spot and futures markets in India using both price discovery and volatility spillover in a detailed manner, especially at the individual agriculture commodity level.

Do Changes in Natural Gas Futures Prices Influence Changes in Natural Gas Spot Prices?

1993 ◽  
Vol 11 (5) ◽  
pp. 467-472 ◽  
Author(s):  
John H. Herbert
Keyword(s):  
Natural Gas ◽  
Futures Markets ◽  
Spot Market ◽  
Spot Markets ◽  
Futures Prices ◽  
Market Prices ◽  
Spot Prices ◽  
Futures Contract

Data on natural gas futures and spot markets are examined to determine if variability in price on futures markets influences variability in price on spot markets. Using econometric techniques, it is found that changes in futures contract prices do not precede changes in spot market prices.

scholarly journals News-Based Research on Forecast of International Natural Gas Price Trend

2020 ◽  
Author(s):  
Tianxiang Li ◽  
Xiaosong Han ◽  
Aoqing Wang ◽  
Hui Li ◽  
Guosheng Liu ◽  
...  
Keyword(s):  
Time Series ◽  
Deep Learning ◽  
Natural Gas ◽  
Predictive Accuracy ◽  
Price Trend ◽  
Learning Network ◽  
Natural Gas Prices ◽  
Deep Learning Network ◽  
Sentiment Score ◽  
Gas Price

In this paper, we build a deep learning network to predict the trends of natural gas prices. Given a time series, for each day, the gas price trend is classified as “up” and “down” according to the price compared to the last day. Meanwhile, we collect news articles as experimental materials from some natural gas related websites. Every article was then embedded into vectors by word2vec, weighted with its sentiment score, and labeled with corresponding day’s price trend. A CNN and LSTM fused network was then trained to predict price trend by these news vectors. Finally, the model’s predictive accuracy reached 62.3%, which outperformed most of other traditional classifiers.

Comparing Flexible CO2 Capture in Gas- and Coal-Dominated Electricity Markets

2011 ◽  
Author(s):  
John R. Fyffe ◽  
Stuart M. Cohen ◽  
Michael E. Webber
Keyword(s):  
Natural Gas ◽  
Co2 Emissions ◽  
Co2 Capture ◽  
Electricity Markets ◽  
Power Plants ◽  
Electricity Price ◽  
Economic Viability ◽  
Electricity Prices ◽  
Modeling Framework ◽  
Co2 Capture Systems

Coal-fired power plants are a source of inexpensive, reliable electricity for many countries. Unfortunately, their high carbon dioxide (CO2) emissions rates contribute significantly to global climate change. With the likelihood of future policies limiting CO2 emissions, CO2 capture and sequestration (CCS) could allow for the continued use of coal while low- and zero-emission generation sources are developed and implemented. This work compares the potential impact of flexibly operating CO2 capture systems on the economic viability of using CCS in gas- and coal-dominated electricity markets. The comparison is made using a previously developed modeling framework to analyze two different markets: 1) a natural-gas dominated market (the Electric Reliability Council of Texas, or ERCOT) and 2) a coal-dominated market (the National Electricity Market, or NEM in Australia). The model uses performance and economic parameters for each power plant to determine the annual generation, CO2 emissions, and operating profits for each plant for specified input fuel prices and CO2 emissions costs. Previous studies of ERCOT found that flexible CO2 capture operation could improve the economic viability of coal-fired power plants with CO2 capture when there are opportunities to reduce CO2 capture load and increase electrical output when electricity prices are high. The model was used to compare the implications of using CO2 capture systems in the two electricity systems under CO2 emissions penalties from 0–100 US dollars per metric ton of CO2. Half the coal-fired power plants in each grid were selected to be considered for a CO2 capture retrofit based on plant efficiency, whether or not SO2 scrubbers are already installed on the plant, and the plant’s proximity to viable sequestration sites. Plants considered for CO2 capture systems are compared with and without inflexible CO2 capture as well as with two different flexible operation strategies. With more coal-fired power plants being dispatched as the marginal generator and setting the electricity price in the NEM, electricity prices increase faster due to CO2 prices than in ERCOT where natural gas-plants typically set the electricity price. The model showed moderate CO2 emissions reductions in ERCOT with CO2 capture and no CO2 price because increased costs at coal-fired power plants led to reduced generation. Without CO2 prices, installing CO2 capture on coal-fired power plants resulted in moderately reduced CO2 emissions in ERCOT as the coal-fired power plants became more expensive and were replaced with less expensive natural gas-fired generators. Without changing the makeup of the plant fleet in NEM, a CO2 price would not currently promote significant replacement of coal-fired power plants because there is minimal excess capacity with low CO2 emissions rates that can displace existing coal-fired power plants. Additionally, retrofitting CO2 capture onto half of the coal-based fleet in NEM did not reduce CO2 emissions significantly without CO2 costs being implemented because the plants with capture become more expensive and were replaced by the coal-fired power plants without CO2 capture. Operating profits at NEM capture plants increased as CO2 price increased much faster than capture plants in ERCOT. The higher rate of increasing profits for plants in NEM is due to the marginal generators in NEM being coal-based facilities with higher CO2 emissions penalties than the natural gas-fired facilities that set electricity prices in ERCOT. Overall, coal-fired power plants were more profitable with CO2 capture systems than without in both ERCOT and NEM when CO2 prices were higher than USD25/ton.

Measuring the Benefits of Greater Spatial Granularity in Short-Term Pricing in Wholesale Electricity Markets

2011 ◽  
Vol 101 (3) ◽  
pp. 247-252 ◽  
Author(s):  
Frank A Wolak
Keyword(s):  
Natural Gas ◽  
Electricity Markets ◽  
Electricity Market ◽  
Short Term ◽  
Locational Marginal Pricing ◽  
Marginal Pricing ◽  
Before And After ◽  
Natural Gas Prices ◽  
The Impact ◽  
Generation Unit

Hourly generation unit-level output levels, detailed information on the technological characteristics of generation units, and daily delivered natural gas prices to all generation units for the California wholesale electricity market before and after the implementation of locational marginal pricing are used to measure the impact of introducing greater spatial granularity in short-term energy pricing. The average hourly number of generation unit starts increases, but both the total hourly energy consumed and total hourly operating costs for all natural gas-fired generation units fall by more than 2 percent after the implementation of locational marginal pricing.

scholarly journals Pricing spark spread options in electricity markets

2021 ◽  
Author(s):  
Shivani Sharma
Keyword(s):  
Natural Gas ◽  
Electricity Markets ◽  
Nuclear Power ◽  
Real Data ◽  
Jump Diffusion ◽  
Electricity Prices ◽  
Market Prices ◽  
Spread Options ◽  
Master's Thesis ◽  
Jump Diffusion Model

This master's thesis develops a pricing method for spark spread options using a Monte Carlo method. The underlying commodities of interest, natural gas and uranium highlight the prevalence of natural gas power and nuclear power in Canada. To characterize the dynamics of electricity prices and capture specific features they have, two Levy models are proposed: a jump-diffusion model and a time-changed model. Real data are used to calibrate the models, using the daily average market prices for the last five years. We created a method to compute the price of the derivative under realistic modelling conditions using parameters found through the real data. Such models can be used to value the spark spread contracts to mitigate the risk associated the contracts.

Turkmenistan is ill-equipped to adapt to low gas price

2017 ◽  
Keyword(s):  
Natural Gas ◽  
Content Type ◽  
Foreign Partner ◽  
Defence Spending ◽  
Natural Gas Prices ◽  
The Government ◽  
Gas Price

Subject Shortages in Turkmenistan despite gas wealth. Significance Despite predictions of more than 6% growth, the Turkmen economy has been hard hit by the decline in natural gas prices since 2014. News of food running out in the shops and cash becoming less available suggests the government is not coping well. Turkmenistan only has one gas customer, China, and the revenues are going partly to offset debt. Impacts The government may have to solicit IMF advice and Russian assistance but will be reluctant to accept their terms. Turkey, a long-term commercial and political friend, may be the most appealing foreign partner. Any upsurge in conflict along the border with Afghanistan will alarm the government and prompt higher defence spending.

The Natural Gas Futures Markets - is it Still Inefficient?

1994 ◽  
Vol 12 (5) ◽  
pp. 369-380 ◽  
Author(s):  
John H. Herbert
Keyword(s):  
Natural Gas ◽  
Futures Markets ◽  
Price Discovery ◽  
Futures Market ◽  
Informational Efficiency ◽  
Natural Gas Market ◽  
Price Series ◽  
Gas Market

The natural gas futures market is fundamental to the current natural gas market both as means of price discovery and for price hedging. Thus, the informational efficiency of the futures market is an important issue. In this article we re-examine the informational efficiency of the natural gas futures market. In this re-examination several cash price series are considered. It is found that the natural gas futures market is informationally efficient for only one of the cash markets. The characteristics of the current natural gas market that might explain the estimated results are also discussed.

Investigation of the price linkage between Asian LNG spot and Far East Asian LNG prices and its implications

2018 ◽  
Vol 1 (1) ◽  
pp. 52-65
Author(s):  
Muhammad Anas Pradipta
Keyword(s):  
Natural Gas ◽  
Unit Root ◽  
East Asian ◽  
Far East ◽  
Unit Root Tests ◽  
Spot Prices ◽  
South Korean ◽  
Natural Gas Prices ◽  
Augmented Dickey Fuller

For so many times, Far East Asian liquid natural gas (LNG) buyers have been using price linked to crude oil-indexed, now they need to find another alternative pricing formula for their crucial energy supply as a better price structure that could reflect the market is needed. LNG spot price is expected to be the pillar for the future LNG trading, especially for Far East Asia Market. As less and less long-term contracts are signed in the Far East Asia Market, this creates an additional demand for the LNG in the spot market, while it raises some issues about the presence of different LNG pricing mechanisms. Most of the LNG spot prices in Asia are indexed to the relatively low natural gas prices in Atlantic Basin. Furthermore, the advancement of drilling technology in the US drives down its natural gas prices, resulting in price discrepancies between Asian LNG spot and East Asian LNG prices. This study investigates whether there is a price linkage between Asian LNG spot and East Asian LNG prices. This study comprehends 91 observations collected from January 2010 to July 2017. Johansen co-integration tests were carried out to examine the existence of long-run relationship on the spot, Japanese and South Korean LNG prices. The Augmented Dickey-Fuller (ADF), Phillip-Perron (PP), and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) unit root tests were conducted first before proceeding to the co-integration tests. The results showed that Asian LNG spot prices did not have price linkage for monthly averages of Japanese and South Korean LNG prices. The analyses also indicated that Taiwan LNG markets move together with Asian LNG spot markets. As a conclusion, the results inferred that supply dependency on LNG spot cargoes governed the price linkage among these Asian LNG markets. The use of gas indexed LNG price mechanism did not reflect the economic fundamentals in Asia-Pacific Basin. JEL Classification: Q41Keywords: Price linkage, Johansen co-integration, augmented Dickey-Fuller, Phillip-Perron, and Kwiatkowski-Phillips-Schmidt-Shin, unit root tests, Far East Asian LNG spot prices, LNG spot and short-term cargoes, long-term contracts, spot prices, energy: demand and supply, prices

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