Using forward markets to improve electricity market design
Lawrence M. Ausubel and
Peter Cramton ()
Utilities Policy, 2010, vol. 18, issue 4, 195-200
Forward markets, both medium term and long term, complement the spot market for wholesale electricity. The forward markets reduce risk, mitigate market power, and coordinate new investment. In the medium term, a forward energy market lets suppliers and demanders lock in energy prices and quantities for one to three years. In the long term, a forward reliability market assures adequate resources are available when they are needed most. The forward markets reduce risk for both sides of the market, since they reduce the quantity of energy that trades at the more volatile spot price. Spot market power is mitigated by putting suppliers and demanders in a more balanced position at the time of the spot market. The markets also reduce transaction costs and improve liquidity and transparency. Recent innovations to the Colombia market illustrate the basic elements of the forward markets and their beneficial role.
Keywords: Electricity; market; design; Forward; market; Capacity; market; Firm; energy; market; Resource; adequacy (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Using Forward Markets to Improve Electricity Market Design (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:18:y:2010:i:4:p:195-200
Access Statistics for this article
Utilities Policy is currently edited by D. Smith
More articles in Utilities Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().