Negative prices in electricity markets
http://www.erasmusenergy.com/articles/91/1/Negative-prices-in-electricity-markets/Page1.html
Cyriel de Jong
Cyriel de Jong is partner at Maycroft Consulting and affiliated to Erasmus University. By Cyriel de Jong
Published on 11/1/2007
Keywords:
Published in: Commodities Now
Publication year: 2003
Co-author 1: Michael Sewalt
In this paper we describe how liberalisation has lead to the segmentation of trading opportunities for electricity with different periods to delivery. We clarify the price characteristics in each segment, including the extreme volatility in short-term prices and the phenomenon that electricity prices can become negative close to the time of delivery. With the Dutch market as an example, we show the implications for risk management and the valuation of derivatives. We argue that a distinct price model is required for risk management and derivative valuation in each market segment. Derivative valuation goes beyond the financial contract itself and can be very useful for taking strategic decisions on flexible generation assets
Keywords:
Published in: Commodities Now
Publication year: 2003
Co-author 1: Michael Sewalt
In this paper we describe how liberalisation has lead to the segmentation of trading opportunities for electricity with different periods to delivery. We clarify the price characteristics in each segment, including the extreme volatility in short-term prices and the phenomenon that electricity prices can become negative close to the time of delivery. With the Dutch market as an example, we show the implications for risk management and the valuation of derivatives. We argue that a distinct price model is required for risk management and derivative valuation in each market segment. Derivative valuation goes beyond the financial contract itself and can be very useful for taking strategic decisions on flexible generation assets
Negative prices in electricity markets
In this paper we describe how liberalisation has lead to the segmentation of trading opportunities for electricity with different periods to delivery. We clarify the price characteristics in each segment, including the extreme volatility in short-term prices and the phenomenon that electricity prices can become negative close to the time of delivery. With the Dutch market as an example, we show the implications for risk management and the valuation of derivatives. We argue that a distinct price model is required for risk management and derivative valuation in each market segment. Derivative valuation goes beyond the financial contract itself and can be very useful for taking strategic decisions on flexible generation assets