Trading Forward in the Brazilian Electricity Market

Paulo Cesar Coutinho and Andre Oliveira
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Paulo Cesar Coutinho: Department of Accounting, University of Brasilia, Brasilia, Brazil

International Journal of Energy Economics and Policy, 2013, vol. 3, issue 3, 272-287

Abstract: We study the interaction between forward and spot electricity markets in a scenario where buyers and sellers are price takers in the forward market and trade through marketers, who play a Cournot game. Our model s main features come from the Brazilian electricity market, where a free contract market coexists with a regulated contract market, and the spot price is the output of a stochastic dynamic algorithm. We are able to show that the price of energy bought (sold) forward decreases (increases) with the number of marketers, and that, as a result, full hedging is achieved in the limit. We also investigate the effects on prices of changes in the number of market participants and in aggregate consumption and supply, an exercise that yields important policy recommendations for the Brazilian regulator.

Keywords: Forward and spot markets; marketers; Brazilian electricity market; Cournot; hedging (search for similar items in EconPapers)
JEL-codes: C61 C72 G10 L13 L94 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2013-03-8

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