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- Financial Risks for Green Electricity Investors and Producers in a Tradable Green Certificate Market
Financial Risks for Green Electricity Investors and Producers in a Tradable Green Certificate Market
- By Jacob Lemming
- Published 09/24/2007
- Energy market design , Risk management
- Unrated
This paper analyzes financial risks in a market for Tradable Green Certificates (TGC), both from the perspective of existing renewable producers and potential investors in new renewable electricity generation capacity. The pricing mechanism for a consumer-based TGC market with perfect competition is described. A TGC system with wind turbines as the sole technology is analyzed. In this framework production from wind turbines and TGC prices will be negatively correlated, implying that a distinction between revenue and price fluctuations is important. Finally analytical expressions for revenue-variance-minimizing trading strategies are derived and an analysis of the demand and supply for financial hedging show that forward contracts will be traded at a risk premium.
