Modeling the Duration of Electricity Price Spikes Using Survival Analysis

Electricity price spikes are the most important characteristic of the electricity price time series. Operationally, they result from various stresses in the power system or the strategic bidding behavior of market participants. These high prices are important as they represent economic opportunities in the form of profits and savings. Theoretically, price spikes are defined as prices that exceed a threshold over a typically short duration. This definition serves as the basis for several established modeling approaches in the literature. In general, the threshold component determines the design of a price spike model, often overlooking the duration aspect. Therefore, this paper presents a simple yet informative model to quantify the duration of electricity price spikes using historical price data from different market jurisdictions. We approach the problem through the lens of survival analysis, a widely used technique for evaluating time-to-event data. Specifically, we use the Kaplan–Meier (KM) estimator, which enables a nonparametric evaluation of the survival (duration) of price spikes over time. We refer to this as the price spike duration model.