Price Volatility And Value-at-risk In Electricity Market Considering Load/Capacity Ratio

From the beginning of the power market reform in1982in Chile，Electricitymarket reform which break the monopoly competition began sweeping the globe，in avery short period of time， and carry out internal America, Britain, New Zealand,Australia. Entered in twenty-first Century，The electric power industry reform into thedeepening stage in China. In this stage of the reform, the main task is to separate thefactory and network, restructuring of power enterprises, and the task is to establish thepower market operation rules and regulatory system, and to establish the regionalelectricity market competition, and to implement a new electricity pricing mechanism.Before the reform of power industry, power subject to state control, the price isdecided by the relevant departments, within a short time, the price is relatively stableand smaller fluctuations. Price shows high volatility in the electricity market and themarket participants face huge price risk, therefore, price risk measurement becomesmore and more importance in electricity market. In practice, Power market participantsare eager to control their loss through the current risk management techniques. Riskmanagement technology is divided into two parts of risk control and risk measurement,risk assessment is the basis of risk control. In order to effectively to the implementationof risk control and to ensure the healthy, stable development of power market, it is veryimportant to model the volatility of electricity price, and to calculate the Value-at-Riskbased on the parameter method in electricity market.This paper analyzes the formation mechanism of price volatility by supply anddemand theory, and believes that the load/capacity ratio plays an important role in theformation of price volatility in electricity market. According to this point, we thenempirically research the electricity price volatility by establishing threshold GARCHmodel with the load/capacity ratio as the threshold variable. Results show that theelectricity price volatility presence threshold effect. Precisely, the price volatility will become very high when the load/capacity ratio is greater than the threshold value, andin this case the price volatility is significantly larger than that when the load/capacityratio is less than the threshold value. This conclusion had an important significance toguide the investment of power in electricity market.Another objective of this paper is to calculate the risk of power market value, Atlast, Combined with the previous conclusion of the price fluctuation, this paperestablishes the threshold TGARCH-I model of electricity price to calculate theValue-at-Risk in electricity market. Compared with GARCH, TGARCH, EGARCHmodel, Generally speaking our new model improves the calculation precision ofValue-at-Risk.