Electricity pool prices: a case study in nonlinear time-series modelling

This paper considers modelling the behaviour of prices in the English and Welsh wholesale electricity pool since the creation of this spot market in 1990. The process turns out to be non-linear and a logistic smooth transition auto regressive model is fitted and shown to be superior to a linear alternative. The behaviour of the estimated model is discussed, and it is seen that non-linearity is needed to describe the institutional characteristics and historical path of pool prices. (author)