September 2014
Intermediate to advanced
432 pages
14h 16m
English
Content preview from The Economics of Electricity Markets
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
13Managing Intertemporal Price Risks
Participants in wholesale electricity markets face volatile wholesale prices. This chapter discusses the standard tools for managing those risks, and some of the ways those tools can be combined to obtain the insurance that participants in the market desire. In this chapter, we focus on the case where there is a single wholesale spot price (network constraints are ignored). This allows us to focus on the question of managing intertemporal price risk. In Chapter 14, we focus on the question of managing differences in prices across different locations on the network (interlocational price risk).
13.1 Introduction to Forward Markets and Standard Hedge Contracts
Wholesale electricity markets are known to be highly volatile. The wholesale spot price may vary by multiples of hundreds or even thousands over the course of the day.
This volatility exposes market participants to risk. Where market participants are risk averse, exposure to risk reduces short-run economic welfare. Exposure to risk can also dampen incentives to make valuable sunk investments, reducing long-run economic welfare.
Participants in wholesale electricity markets will typically seek to minimise their exposure to price volatility. Market participants can reduce their exposure to this volatility by participating in the forward markets.
A trade in the forward market can be an agreement to take physical delivery of the good or service at a given time in the future at a fixed price. ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.