Managing Flexible Load Contracts: Two simple strategies

Petter Bjerksund, Bjarte Myksvoll () and Gunnar Stensland
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Bjarte Myksvoll: Viz Risk Management

No 2006/21, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: A flexible load contract is a type of swing option where the holder has the right to receive a given quantity of electricity within a specified period, at a fixed maximum effect (delivery rate). The contract is flexible, in the sense that delivery (the take hours) is called one day in advance. We investigate two simple strategies for managing flexible load contracts, where both use price information from the forward market. For 10 contracts traded in the period 1997-2001, we calculate the performance of the two strategies and compare with the reported performance of one complex dynamic programming approach as well as the actual results obtained by three anonymous market participants. The comparison indicates that our simple computer-efficient strategies perform better on average and produces more stable results.

Keywords: Flexible Load Contracts; computer-efficient strategies; dynamic programming (search for similar items in EconPapers)
JEL-codes: C61 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2006-12-01
New Economics Papers: this item is included in nep-cse and nep-ene
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