Forward contracts in electricity markets: The Australian experience

Estimating the value of electricity storage in an energy-only wholesale market

“…3 South Australian demand has been declining since 2011, in part as result of increased solar generation 'behind the meter'. 4 Uncontracted power plant, entirely reliant on spot market outcomes.…”

“…Power purchase agreements for bulk energy generation are typically structured as a swap contract (sometimes called a contract for differences). A more relevant product for generators supplying peak capacity are cap contracts, which are a derivative product similar to an option [4]. Currently, any new OCGT capacity would be financed through the sale of cap contracts, (and conversely, OCGT's are a major sellor of cap contracts 5 ).…”

“…Rapid variations in demand over short periods, outages of generators or transmission lines, and generator bidding behaviour result in highly volatile prices [4]. Historically, flexible generators such as Open Cycle Gas Turbines (OCGT) have been used to provide peak capacity and respond to these rapid changes in demand and price.…”

Modelling interregional links in electricity price spikes

“…An important feature both of this particular electricity market and of deregulated electricity markets worldwide is the periodic occurrence of abnormally high prices or price spikes in the spot electricity market (Barlow, 2002;de Jong and Huisman, 2003;Escribano, et al, 2002;Lucia and Schwartz, 2002;Burger et al, 2003;Byström, 2005;Cartea and Figueroa, 2005). Both the size of these irregular price events and their duration are particularly harmful to electricity retailers who cannot pass on price risk to customers, Anderson et al (2006). Consequently, improving the understanding of factors contributing to the occurrence of extreme price events is important for risk management in the energy sector.…”

Do firms sell forward for strategic reasons? An application to the wholesale market for natural gas

“…Even if centralized futures markets are more transparent, seen that arbitrage opportunities across the exchanges and the OTC markets are not always fully exhausted, the existence of conflicting price signals (as the law of one price fails) further troubles the quality of the inferences market participants can make (see e.g. Anderson, Hu and Winchester, 2007;Bushnell, 2007).…”