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Valuation, Hedging and Speculation in Competitive Electricity Markets

A Fundamental Approach

  • Petter L. Skantze
  • Marija D. Ilic

Table of contents

  1. Front Matter
    Pages i-xv
  2. Petter L. Skantze, Marija D. Ilic
    Pages 1-6
  3. Petter L. Skantze, Marija D. Ilic
    Pages 7-29
  4. Petter L. Skantze, Marija D. Ilic
    Pages 31-40
  5. Petter L. Skantze, Marija D. Ilic
    Pages 41-51
  6. Petter L. Skantze, Marija D. Ilic
    Pages 53-60
  7. Petter L. Skantze, Marija D. Ilic
    Pages 61-111
  8. Petter L. Skantze, Marija D. Ilic
    Pages 113-133
  9. Petter L. Skantze, Marija D. Ilic
    Pages 135-148
  10. Petter L. Skantze, Marija D. Ilic
    Pages 149-175
  11. Petter L. Skantze, Marija D. Ilic
    Pages 193-195
  12. Back Matter
    Pages 197-214

About this book

Introduction

The challenges currently facing particIpants m competitive electricity markets are unique and staggering: unprecedented price volatility, a crippling lack of historical market data on which to test new modeling approaches, and a continuously changing regulatory structure. Meeting these challenges will require the knowledge and experience of both the engineering and finance communities. Yet the two communities continue to largely ignore each other. The finance community believes that engineering models are too detailed and complex to be practically applicable in the fast changing market environment. Engineers counter that the finance models are merely statistical regressions, lacking the necessary structure to capture the true dynamic properties of complex power systems. While both views have merit, neither group has by themselves been able to produce effective tools for meeting industry challenges. The goal of this book is to convey the fundamental differences between electricity and other traded commodities, and the impact these differences have on valuation, hedging and operational decisions made by market participants. The optimization problems associated with these decisions are formulated in the context of the market realities of today's power industry, including a lack of liquidity on forward and options markets, limited availability of historical data, and constantly changing regulatory structures.

Keywords

Electricity Markets electricity model modeling network transmission

Authors and affiliations

  • Petter L. Skantze
    • 1
  • Marija D. Ilic
    • 2
  1. 1.Caminus CorporationUSA
  2. 2.Massachusetts Institute of TechnologyUSA

Bibliographic information