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http://dx.doi.org/10.15266/KEREA.2022.31.3.393

What determines the Electricity Price Volatility in Korea?  

Lee, Seojin (School of Economics, Hongik University)
Kim, Young Min (Department of International Trade, JeonBuk National University)
Publication Information
Environmental and Resource Economics Review / v.31, no.3, 2022 , pp. 393-417 More about this Journal
Abstract
Using hourly SMP data from 2016 to 2020, this paper measures the weekly realized volatility and investigates the main force of its determinants. To this end, we extend the Bayesian variable selection by incorporating the regime-switching model which identifies important variables among a large number of predictors by regimes. We find that the increase in coal and nuclear generation, as well as solar power, reinforce the SMP volatility in both high volatility and low volatility regime. In contrast the increase in gas generation and gas price decrease SMP volatility when SMP volatility is high. These results suggest that the expansion of renewable energy according to 2050 Carbon Neutrality or energy transition policies increases SMP volatility but the increase in the gas generation or reduction of coal generation might offset its impact.
Keywords
Electricity price volatility; Realized volatility; Bayesian variable selection; Regime-switching; Solar power;
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Times Cited By KSCI : 1  (Citation Analysis)
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