An Error Correction Model Analysis on the Traded Volumes in JEPX Day-ahead Spot Market

Abstract

The traded volumes in Japan Electric Power Exchange (JEPX) are desired to increase. However, few studies have clarified what factors have contributed to impacting the traded volumes, including the time-wise changes of these contributions. In this study, the authors analyzed the traded volume using error correction models. As a result, a cointegration relationship was found where the traded volume of 1GWh was mainly associated with the buying bids of 2.8-4.0GWh, while such association with the selling offers was minor. In addition, the traded volume was also influenced by short-term disturbances that reverted to this cointegration equilibrium in about three weeks. However, much of such short-term disturbances were based on the past deviation from the cointegration equilibrium, implying the importance of buying bid increases.