Undergraduate Honors Theses

Thesis Defended

Spring 2015

Document Type

Thesis

Type of Thesis

Departmental Honors

Department

Economics

First Advisor

Dan Kaffine

Abstract

This paper observes what effect, if any, weather events exert on congestion prices in energy markets. Millions of dollars are traded daily in these markets, and with the knowledge of how weather events affect electricity prices, traders can make more informed decisions on when to act. I have 7 years of panel data at the zonal level of the New England Independent System Operator market to contrast with National Oceanic and Atmospheric Administration weather data from surface meteorological stations. I utilized an ordinary least squares model controlling for season by year, day of week, and zonal fixed effects along with various demand side controls to test for the effect of weather events on average zonal daily real time congestion prices. My results suggest that in the New England Independent System Operator market, on average, hail decreases congestion pricing, sleet and tornadoes increase congestion pricing, days following tornadoes and freezing rain have higher congestion pricing, and days following thunderstorms have lower congestion pricing.

Share

COinS