Load-Following Forward Contracts

David Brown and David Sappington

The Energy Journal, 2023, vol. 44, issue 3, 187-222

Abstract: Suppliers and large buyers of electricity often sign load-following forward contracts (LFFCs). A LFFC obligates an electricity supplier to deliver at a pre-specified unit price a fraction of the buyer’s ultimate demand for electricity. We show that relative to more standard (“swap†) forward contracts, LFFCs can reduce the variation in the wholesale price of electricity. However, LFFCs also can increase the expected wholesale price and thereby reduce expected consumer surplus and total surplus.

Keywords: Load-following forward contracts; Swap contracts; Electricity sector (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: Load-Following Forward Contracts (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:44:y:2023:i:3:p:187-222

DOI: 10.5547/01956574.44.2.dbro

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