EconPapers    
Economics at your fingertips  
 

ASSESSMENT OF TRANSMISSION CONGESTION PRICE RISK AND HEDGING IN THE BRAZILIAN ELECTRICITY MARKET

Fernando Porrua, Luiz Barroso (), Max Junqueira, Gladis Schuch and Alexandre Street
Additional contact information
Fernando Porrua: PSR Brazil
Max Junqueira: PSR Brazil
Gladis Schuch: PSR Brazil
Alexandre Street: PSR Brazil

Risk and Insurance from EconWPA

Abstract: The objective of this paper is to provide a methodology for pricing, under a generation company (Genco) point of view, long-term energy contracts signed across different price zones in a zonal pricing hydro- based power system where classical Financial Transmission Rights (FTRs) are not available. The main result is the establishment of the overprice that a Genco must include in the contract signed in a neighbor zone (where the Genco faces the congestion risk) when compared to the same contract offered in its own zone (with no congestion risk). All relevant risks (hydrological risk, congestion risk, etc) are captured for the long-term through the use of scenarios. Based on these scenarios and on the risk profile of the agent modeled by Utility Functions (UFs), the pricing of cross-zones contracts are determined. The approach will be illustrated with practical examples deriving from the Brazilian electricity market, which is hydro-based, has a zonal-pricing scheme and does not offer instruments to hedge against congestion risks, such as FTRs.

Keywords: Congestion; Risk; -; Risk; Pricing; -; Transmission; Congestion; -; Utility; Functions; -; Energy; Auction (search for similar items in EconPapers)
Date: 2005-08-30
Note: Type of Document - doc; pages: 8
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://econwpa.repec.org/eps/ri/papers/0508/0508001.doc (application/msword)

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: http://EconPapers.repec.org/RePEc:wpa:wuwpri:0508001

Access Statistics for this paper

More papers in Risk and Insurance from EconWPA
Series data maintained by EconWPA ().

 
Page updated 2017-03-26
Handle: RePEc:wpa:wuwpri:0508001