 The role of uncertainty on hedging and electricity spot market powerGabriel Fiuza de Braganca No 19211, Working Paper Series from Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation Abstract: The exertion of market power in electricy wholesale markets is an issue of great academic and practical debate. In particular the role of a given amount of hedge on market power has been of considerable interest. However the relationship between risk management spot market power and hedge pricing has not yet received proper attention. The model discussed in this presentation incorporates NZEM features such as demand and cost uncertainty risk aversion oligopoly vertical integration and uniform-price auctions and analyses the effect of volatility on hedging decisions forward prices and market power. In particular we show that usual electricity spot market power measures such as the Lerner Index are not only affected by conduct but also by stochastic variables that influence demand and costs. In other words in highly concentrated electricity markets with forward contracts the usual measure of market power can reflect risk management instead of solely oligopolistic conduct. The results are illustrated with actual NZEM data. Keywords: market power; electricity wholesale; hedge pricing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:vuw:vuwcsr:19211 Access Statistics for this paper More papers in Working Paper Series from Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation ISCR, PO Box 600, Victoria University Wellington 6140, New Zealand. Contact information at EDIRC. |
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