Risk Transfer in an Electricity Market

Energy is traded using different products; long-term contracts or electricity forward contracts can assure the future transaction price. However, due to the difficulties in storing electrical energy for long periods and in large amounts, risks must be incorporated when defining contract prices throu...

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Autores principales:	David Esteban Rodriguez, Alfredo Trespalacios, David Galeano
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	electricity market Forward Risk Premia (FRP) contagion model ARIMAX Mathematics QA1-939
Acceso en línea:	https://doaj.org/article/153ae47d9124427b919b001ae1648a88
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spelling	oai:doaj.org-article:153ae47d9124427b919b001ae1648a882021-11-11T18:14:07ZRisk Transfer in an Electricity Market10.3390/math92126612227-7390https://doaj.org/article/153ae47d9124427b919b001ae1648a882021-10-01T00:00:00Zhttps://www.mdpi.com/2227-7390/9/21/2661https://doaj.org/toc/2227-7390Energy is traded using different products; long-term contracts or electricity forward contracts can assure the future transaction price. However, due to the difficulties in storing electrical energy for long periods and in large amounts, risks must be incorporated when defining contract prices through a Forward Risk Premia (FRP). This study analyzes the transfer of uncertainty from electricity market variables to the FRP in long-term contracts. We evaluate a type of econometric risk with the construction of Autoregressive Distributed Lag contagion models for the FRP using electricity demand, spot price, power generation via different technologies, and the Oceanic Niño Index. As a case study, we consider the Colombian electricity market. Our results show empirical models where the FRP has a short-term response with the following variables: hydropower generation, coal power generation, electricity demand, and Oceanic Niño Index, even though its transaction is reflected one or two years after the occurrence of the event.David Esteban RodriguezAlfredo TrespalaciosDavid GaleanoMDPI AGarticleelectricity marketForward Risk Premia (FRP)contagion modelARIMAXMathematicsQA1-939ENMathematics, Vol 9, Iss 2661, p 2661 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	electricity market Forward Risk Premia (FRP) contagion model ARIMAX Mathematics QA1-939
spellingShingle	electricity market Forward Risk Premia (FRP) contagion model ARIMAX Mathematics QA1-939 David Esteban Rodriguez Alfredo Trespalacios David Galeano Risk Transfer in an Electricity Market
description	Energy is traded using different products; long-term contracts or electricity forward contracts can assure the future transaction price. However, due to the difficulties in storing electrical energy for long periods and in large amounts, risks must be incorporated when defining contract prices through a Forward Risk Premia (FRP). This study analyzes the transfer of uncertainty from electricity market variables to the FRP in long-term contracts. We evaluate a type of econometric risk with the construction of Autoregressive Distributed Lag contagion models for the FRP using electricity demand, spot price, power generation via different technologies, and the Oceanic Niño Index. As a case study, we consider the Colombian electricity market. Our results show empirical models where the FRP has a short-term response with the following variables: hydropower generation, coal power generation, electricity demand, and Oceanic Niño Index, even though its transaction is reflected one or two years after the occurrence of the event.
format	article
author	David Esteban Rodriguez Alfredo Trespalacios David Galeano
author_facet	David Esteban Rodriguez Alfredo Trespalacios David Galeano
author_sort	David Esteban Rodriguez
title	Risk Transfer in an Electricity Market
title_short	Risk Transfer in an Electricity Market
title_full	Risk Transfer in an Electricity Market
title_fullStr	Risk Transfer in an Electricity Market
title_full_unstemmed	Risk Transfer in an Electricity Market
title_sort	risk transfer in an electricity market
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/153ae47d9124427b919b001ae1648a88
work_keys_str_mv	AT davidestebanrodriguez risktransferinanelectricitymarket AT alfredotrespalacios risktransferinanelectricitymarket AT davidgaleano risktransferinanelectricitymarket
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Risk Transfer in an Electricity Market

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