Jacob Lemming

 Articles by this Author

Keywords: Tradable Green Certificates, Financial Risk, Forward Contracts
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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.

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In liberalized electricity markets power producers face a wide range of decision problems that require modelling of electricity prices as a crucial input. In this chapter we look at risk management decisions and specifically on how electricity price modelling affects the optimal solution to a relatively simple risk management decision problem