Electricity Consumption Patterns and Price Volatility In Türkiye: A Wavelet Analysis

• Published in: Bogazici Journal 2023, Vol.37 (2), p.92-117
• Main Authors: Uluceviz, Erhan, Schmidbauer, Harald, Rösch, Angi
• Format: Article
• Language: English
• Subjects: Electricity; Energy consumption; Holidays & special occasions; Liberalization; Monopolies; Prices; Privatization; Supply & demand; Time series; Volatility; Wavelet transforms
• ISSN: 2717-896X; 1300-9583; 2717-896X
• DOI: 10.21773/boun.37.2.3

For two decades, the now decentralized Turkish electricity market has been undergoing liberalization, similar to other electricity markets worldwide, and has essentially adopted the European market structure. Hourly electricity prices are determined by maximizing market surplus. These prices fluctuate wildly, owing to the nature of electricity as a commodity. Hourly electricity consumption data, on the other hand, exhibit a strong periodic pattern resulting from consumers' daily routines. These may be disturbed on "non-regular" days, such as weekends and holidays, making the pattern of electricity consumption less regular. We hypothesize that a low level of regularity of consumption translates into elevated price volatility. The empirical basis for this study consists of hourly electricity consumption and price data for Türkiye during 2017-2022. We perform a wavelet analysis of the consumption data in order to capture the strength, or wavelet power, of periodic patterns across time, and investigate the effect of holidays and weekends on wavelet power. These wavelet power series, quantifying consumption regularity, serve as input to regression models explaining intraday price volatility. With this novel approach, we can show, for example, that an interruption of daily routines (on "non-regular" days) leads to higher electricity price volatility.