Efficient Frontiers for Short-term Sales of Spot and Forward Wind Energy in Texas

Kang Hua Cao, Han Qi, Chi-Keung Woo, Jay Zarnikau () and Raymond Li

The Energy Journal, 2024, vol. 45, issue 6, 37-60

Abstract: Texas’s windfarm construction continues unabated, despite wind energy’s cannibalization effect on wind generation’s investment incentive and the rising popularity of short-term wind power purchase agreements (PPAs). Using ERCOT’s monthly data for Jan-2011 to Dec-2021, we develop spot energy price forecasts by time of day (TOD) and their standard deviations to derive the efficient frontiers (EFs) for spot and forward energy sales of a risk-averse windfarm developer under a short-term wind PPA of not more than ten years. These EFs reveal a windfarm’s operating revenue forecast tends to increase with the PPA’s forward energy prices. Further, the windfarm’s revenue risk and forecast move in tandem, akin to the risk-return relationship rooted in Markowitz’s portfolio theory. Hence, the developer tends to sell one hundred percent (

Keywords: wind energy development; efficient frontiers; short-term power purchase agreements; spot energy sale; forward energy sale; Texas (search for similar items in EconPapers)
Date: 2024
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Working Paper: Efficient frontiers for short-term sales of spot and forward wind energy in Texas (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:45:y:2024:i:6:p:37-60

DOI: 10.1177/01956574241287500

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