Storage and the electricity forward premium

Douglas, Stratford; Popova, Julia

doi:10.1016/j.eneco.2007.12.013

Cited by 56 publications

(71 citation statements)

References 11 publications

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“…The results found by Douglas and Popova (2008) are important. They extend the current knowledge on valuing electricity derivatives prices and show that increased indirect (fuel) storability leads to increased production flexibility which then leads to less electricity price uncertainty and risk a lower electricity forward prices.…”

Section: Introductionmentioning

confidence: 76%

“…Douglas and Popova (2008) find empirical evidence that gas storage inventories influence the electricity forward premium such that electricity forward premiums are lower in times when gas storage inventories are high, especially on days with high temperatures.…”

Section: Introductionmentioning

confidence: 99%

“…Although electricity is not directly storable, power plants may store electricity 2 indirectly by storing the underlying fuels and having flexibility in production. This is what Douglas and Popova (2008) argue and they examine the influence of gas storage inventory levels on the electricity forward premium.…”

Section: Introductionmentioning

confidence: 99%

“…

AbstractThis paper examines the robustness of the results found by Douglas and Popova (2008). They examine the electricity forward premium in relation to gas storage inventories and find that, although electricity is not directly storable, electricity forward premiums are lower when gas storage inventories are higher, especially on days with high temperatures.

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confidence: 99%

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A comment on: Storage and the electricity forward premium

Treslong

Huisman

2010

Energy Economics

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This paper examines the robustness of the results found by Douglas and Popova (2008). They examine the electricity forward premium in relation to gas storage inventories and find that, although electricity is not directly storable, electricity forward premiums are lower when gas storage inventories are higher, especially on days with high temperatures. Douglas and Popova (2008) and show that their results are not influenced by the specification of the forward premium model.

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Section: Introductionmentioning

confidence: 76%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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confidence: 99%

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A comment on: Storage and the electricity forward premium

Treslong

Huisman

2010

Energy Economics

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“…It is noteworthy that this finding could be linked to price expectations, which rely on the cost of generation and correlate forward prices with energy commodity prices (coal and gas), as discussed in the literature (e.g. Douglas and Popova, 2008;Bloys van Treslong and Huisman, 2010). Hence, there is no support for hypothesis 1.…”

Section: Integration and Fractional Integration Of Electricity Forwarmentioning

confidence: 99%

Reassessing the integration of European electricity markets: A fractional cointegration analysis

Menezes

Houllier

2016

Energy Economics

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This is the accepted version of the paper.This version of the publication may differ from the final published version. for assessing electricity spot market convergence, because spot prices are found to be fractionally integrated and mean-reverting time series. Furthermore, spot price behaviour and their association with different markets change over time, reflecting changes in the EU electrical system. One-month-ahead prices, by contrast, were found to have become more resilient to shocks and to follow more stable trends. Permanent repository link:

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Risk Premium in Electricity Prices: Evidence from the PJM Market

Xiao

Colwell

Bhar

2014

Journal of Futures Markets

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In this article, we construct a stochastic model for electricity spot prices, derive a pricing formula for electricity forward contracts, and specify risk premia inherent in such contracts. Our spot price model accounts for seasonality, mean‐reversion, and time‐varying jump intensity. Empirically, the model with a sinusoidal seasonal function, different mean‐reversion rates for the diffusion and jumps, and constant volatility is most appropriate among six different models for the United States market. The modeling approach leads us to investigate the stochastic risk premium due to both the diffusion and the jump components explicitly. The empirical results reveal that both risk premia are time‐varying and state‐dependent. The diffusion risk premium is negatively correlated with the diffusion level and fluctuates about zero, and the jump risk premium is negatively correlated with the jump level and always negative. In magnitude, the jump risk premium is much larger than the diffusion risk premium. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:776–793, 2015

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Storage and the electricity forward premium

Cited by 56 publications

References 11 publications

A comment on: Storage and the electricity forward premium

A comment on: Storage and the electricity forward premium

Reassessing the integration of European electricity markets: A fractional cointegration analysis

Risk Premium in Electricity Prices: Evidence from the PJM Market

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