Session 04: Electricity Market Economics
Is the EUA a New Asset Class?
University of Valencia, Spain
The listing of a new asset requires the knowledge of its statistical properties prior to its use for hedging, speculative or risk management purposes. In this paper, we study the stylized facts of European Union Allowances (EUAs) returns. The majority of the phenomena observed, such as heavy tails, volatility clustering, asymmetric volatility and the presence of a high number of outliers are similar to those observed in commodity futures. However, other statistical properties typical of financial assets, such as negative asymmetry and absence of an inflation hedge, are also detected. Therefore, our results indicate, surprisingly, that EUAs do not behave like common commodity futures.
Electricity Spot Market Simulation Involving Bilateral Contracts Hedging
Faculty of electrical engineering Osijek, Croatia
The traditional electric companies operated as a regulated monopoly are separated in those for generation (GenCo), transmission (TransCo) and distribution (DisCo). Demanding companies (DemCo), ISO (Independent system operator), and regulator are new companies which enable function of restructured electricity market. Regarding the time dimension, wholesale electricity markets are divided into the two groups: spot market and bilateral electricity market. A bilateral contract is an agreement between two parties to exchange electric power under a set of specified conditions such as MW amount, time of delivery, duration, and price. Forward contract price predictability is the great advantage to spot price volatility, contracted parties are in that way hedged against such a risk, but the forward contracted price may be disadvantageous compared to the spot price. Generator and load can conclude a mutually beneficial and risk tolerable forward contract. In order to investigate GenCo strategies and possible benefit of bilateral agreement for two agents, model of electricity market with 6 GenCos and 5 DemCos is made in EMCAS. Three scenarios are simulated: first one is the base case where all GenCos are applying production cost strategy; in second case one GenCo is applying price-probing strategy; third scenario is case where bilateral forward agreement is conclude between one GenCo and one DemCo. Comparisons of the results are presented
The Financial Regulation of Energy and Environmental Markets
1Norwich Business School & Energy and Environmental Finance Group, University of East Anglia, United Kingdom; 2School of Law, University of East Anglia, United Kingdom; 3Bangor Business School, Bangor University, UK
An often cited critique of financial regulation is that it is a patchwork of legislation addressing past crises. This paper provides a forward looking account as to the financial risks that European wholesale energy and environmental markets (EEM) may pose and to what extent current regulatory regimes and legislative developments address these risks. In the first part of the paper we explore the nature of these risks within the context of past academic research on financial crises and financial regulation leading to a theoretical justification for the risk based financial regulation of EEM. The second part of the paper provides a summary of a legislative analysis of the evolving approach to the financial regulation of EEM conducted in a related paper. We discuss some of the likely impacts of these reform initiatives and make suggestions for further research.
Private Investments Profitability in the Croatian Liberalized Energy Market
Korlea Invest, Croatia
Electricity deficit in Croatia requires significant investments into new production capacities in order to satisfy future rising needs. Due to, the lack of investments and more than thirty years old production power plants, investments in new production capacities are the most important prerequisite for future economic growth and development in Croatia. In order to estimate investment profitability of a new gas power plant, spark spread analysis based on historical spot prices has been done. Profitability of the independent power producer and feasibility of such market oriented investment has been analyzed. Taking into account all relevant costs the investment effectiveness of a CCGT power plant operation on a fully liberalized Croatian energy market has been estimated.
The Customer Perspective of the Electric Vehicles Role on the Electricity Market
Recent studies have investigated the impact and effects of using batteries in connected electric vehicles as ancillary services to the electricity grid. A common assumption made is that all parked cars are connected to the grid and available for recharging or discharging. However, the level of flexibility
of people’s behavior is important and will affect the potential of using car batteries for regulation power. How customers will react if they are expected to recharge or discharge whenever the electric system need it, will depend on incentives and peoples willingness to adapt. This paper reviews existing research regarding electric vehicles and their interaction with the electric power system and investigate conditions for a potential use of the batteries
as regulation power. The customer perspective of the electric vehicle’s role on the electricity market is analyzed considering participation in the control power market.
Market Coupling of South East Europe in the Electricity Sector
1HROTE; 2EIHP; 3Petrol
Market coupling with the mechanism of implicit auctions is a new and increasingly employed model of coupling of different national electricity markets, where national market operators remain independent legal persons. ERGEG, in its efforts to develop a more integrated European energy market, sees the role of European regional connections as essential for the development of a liberalised market. Building of a common European market in the electricity sector requires a special coherent strategy, considering the characteristics of electricity as a commodity on the market, but also as a physical phenomenon. Consequently, activities are taking place based on a three-fold strategic approach: the first one is a legally binding contract defining key objectives with timeframes, the second one is the selection of a market model deriving from the best practice which will enable regional harmonisation and the third one is establishment of a suitable coordinating and monitoring body.