CoulonPowellSircar_May2013.pdf (2 MB)
A model for hedging load and price risk in the Texas electricity market
journal contribution
posted on 2023-06-08, 15:25 authored by Michael Coulon, Warren B Powell, Ronnie SircarEnergy companies with commitments to meet customers’ daily electricity demands face the problem of hedging load and price risk. We propose a joint model for load and price dynamics, which is motivated by the goal of facilitating optimal hedging decisions, while also intuitively capturing the key features of the electricity market. Driven by three stochastic factors including the load process, our power price model allows for the calculation of closed-form pricing formulas for forwards and some options, products often used for hedging purposes. Making use of these results, we illustrate in a simple example the hedging benefit of these instruments, while also evaluating the performance of the model when fitted to the Texas electricity market.
History
Publication status
- Published
File Version
- Accepted version
Journal
Energy EconomicsISSN
0140-9883Publisher
ElsevierExternal DOI
Volume
40Page range
976-988Department affiliated with
- Business and Management Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2013-07-19First Open Access (FOA) Date
2013-07-19First Compliant Deposit (FCD) Date
2013-07-19Usage metrics
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