Title :
Using weather derivatives to improve the efficiency of forward markets for electricity
Author_Institution :
Dept. of Appl. Econ. & Manage., Cornell Univ., Ithaca, NY, USA
Abstract :
The analysis in this paper demonstrates that a combination of 1) a forward contact, with fixed price for both base land and peaking power, and 2) a collar option for the number of hot days in a summer is an effective way to reduce the risk of purchasing electricity in a spot market. The main advantages are 1) the effectiveness of price signals is strengthened by making peaking power expensive, and 2) the correlation between payouts from the weather option and high prices is increased.
Keywords :
contracts; electricity supply industry; base land power; collar option; forward contact; forward markets; payouts; peaking power; spot market; weather option; Energy management; Engineering management; Forward contracts; Power generation economics; Power system analysis computing; Power system economics; Power system management; Power system reliability; Technology management; Uncertainty;
Conference_Titel :
System Sciences, 2002. HICSS. Proceedings of the 35th Annual Hawaii International Conference on
Print_ISBN :
0-7695-1435-9
DOI :
10.1109/HICSS.2002.993961
