Analysis of Financial Transmission Rights Obligations and Hourly Congestion Prices in PJM Markets
Date
2019-09-17
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
In this research we analyze patterns of FTR obligation contracts using hourly data from January 1st, 2015 through December 31st, 2018 between PJM Western and AEP Dayton hubs and concluded that there are positive net profits in FTR obligation contracts if someone were to buy and hold the contracts until they were actualized. We applied Schwartz’s one-factor log-model to changes in congestion prices, but our tests showed that residuals of the model are not normally distributed. We then applied OU process to outright congestion prices and used recursive approach proposed by Clewlow and Strickland (2000) to remove jumps from OU residuals. We concluded that non-jump and jump data sets are not normally distributed in both PJM Western and AEP Dayton hubs. Given congestion prices showed fat-tails and non-normal distributions for both jumps and non-jumps data points, we applied Johnson’s Unbounded Distribution to congestion prices and calibrated its parameters for both congestion prices. We defined a variable to filter out hourly data depending on how much of transmission interface were used in different hours and we recalibrated sets of parameters for those cases.
Description
Keywords
Financial Transmission Rights, PJM market, Power market, Mathematics
Citation
Arablou, Z. (2019). Analysis of Financial Transmission Rights Obligations and Hourly Congestion Prices in PJM Markets (Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.