In this paper we develop a new approach to understanding the behavior of high frequency electricity spot prices. It treats electricity delivered at different times of the day as different commodities while recognizing that these commodities may be traded on a small number of intra-day markets. We first present a detailed analysis of the high frequency dynamics of prices at a key New Zealand node. Our analysis which includes the use of a periodic autoregression model supports the treating of electricity as multiple commodities and also reveals intrinsic correlation properties that indicate the existence of distinct intra-day markets. Conventional models cannot adequately capture properties that have important implications for derivative pricing and real options analysis. We therefore extend the literature by introducing a state space model of high frequency spot prices that preserves this intra-day market structure
