The Electricity Forward Premium: Renewable Energy Sources and Skewness Preferences

Dongchen He, Ronald Huisman and Bert Willems
Additional contact information
Bert Willems: Université catholique de Louvain, LIDAM/CORE, Belgium

No 2026010, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: There is mixed empirical evidence on the premiums that explain electricity forward prices. We argue that the growth of electricity supplied by renewable energy sources and the preference for skewness may provide an explanation. We extend an existing equilibrium model by incorporating these features. The model predicts that the influence of spot price variance and skewness on forward prices is undetermined, reconciling mixed empirical findings. Moreover, we find additional premiums related to the covariance and coskewness of renewable supply and spot prices, that explain the forward premium. We provide empirical support using data from the German power market.

Pages: 40
Date: 2026-05-01
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:cor:louvco:2026010

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().