Is flexible and dispatchable generation capacity rewarded in electricity futures markets? A multinational impact analysis

Petr Spodniak and Valentin Bertsch ()

Energy, 2020, vol. 196, issue C

Abstract: The profitability of electricity market participants providing flexibility and dispatchability is affected by different determinants. We study how variable renewable energy sources (vRES) and other factors impact both electricity futures prices and hedgeable profit margins of gas generators, proxied by clean spark spreads (CSSs) in futures markets. We focus on futures markets in three European countries (Germany, UK, Nordic) over the time period 2009–2016. We use a statistical univariate ARX TGARCH model that addresses persistency and volatility clustering. We find that the growth in vRES capacity reduces both electricity prices and CSSs more strongly than the changes in the futures fuel and carbon markets. Specifically, an additional 1 GW of installed wind capacity is associated with a decline by 6 cents (1.2%) and 37 cents (0.8%) per MWh in the German CSS and peak load electricity futures, respectively. An additional 1 GW of installed PV capacity is associated with a decline by 4 cents (0.8%) and 28 cents (0.6%) per MWh in the German CSS and peak load electricity futures, respectively. The results suggest that in systems dominated by vRES new markets or instruments may be needed allowing for an adequate risk management for flexible and dispatchable power generators.

Keywords: Financial risk management; Hedging; Futures markets; Electricity markets; Carbon market (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0360544220301572
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:196:y:2020:i:c:s0360544220301572

DOI: 10.1016/j.energy.2020.117050

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

More articles in Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().