Potential benefits of optimal intra-day electricity hedging for the environment: the perspective of electricity retailers

Raphaël Boroumand, Stéphane Goutte, Thomas Porcher and Khaled Guesmi
Additional contact information
Raphaël Boroumand: PSB - Paris School of Business - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université

Working Papers from HAL

Abstract: Our article provides a better understanding of risk management strategies for all energy market stakeholders. A good knowledge of optimal risk hedging strategies is not only important for energy companies but also for regulators and policy makers in a context of climate emergency. Indeed, the electricity sector is key to achieve energy and ecological transition. Electricity companies should be on frontline of climate change struggle. Taking the perspective of electricity retailers, we analyze a range of portfolios made of forward contracts and/or power plants for specific hourly clusters based on electricity market data from the integrated German-Austrian spot market. We prove that intra-day hedging with forward contracts is sub-optimal compared to financial options and physical assets. By demonstrating the contribution of intra-day hedging with options and physical assets, we highlight the specificities of electricity markets as hourly markets with strong volatility during peak hours. By simulating optimal hedging strategies, our article proposes a range of new portfolios for electricity retailers to manage their risks and reduce their sourcing costs. A lower hedging cost enables to allocate more resources to digitalization and energy efficiency services to take into account customers' expectations for more climate-friendly retailers. This is a virtuous circle. Retailers provide high value-added energy efficiency services so that consumers consume less. The latter contributes to reach electricity reduction targets to fight climate warming.

Keywords: Electricity; Climate; Diversification; Risk; Intra-day; Hedging (search for similar items in EconPapers)
Date: 2019-07-05
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur, nep-reg and nep-rmg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02175358
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://shs.hal.science/halshs-02175358/document (application/pdf)

Related works:
Journal Article: Potential benefits of optimal intra-day electricity hedging for the environment: The perspective of electricity retailers (2019)
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:hal:wpaper:halshs-02175358

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().