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Valuation, Hedging and Speculation in Competitive Electricity Markets

A Fundamental Approach

  • Book
  • © 2001

Overview

Authors:
  1. Petter L. Skantze

    1. Caminus Corporation, USA

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    You can also search for this author in PubMed   Google Scholar

  2. Marija D. Ilic

    1. Massachusetts Institute of Technology, USA

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    You can also search for this author in PubMed   Google Scholar

Part of the book series: Power Electronics and Power Systems (PEPS)

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Table of contents (11 chapters)

  1. Front Matter

    Pages i-xv
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  2. Introduction

    • Petter L. Skantze, Marija D. Ilic
    Pages 1-6

  3. Overview of Valuation and Hedging Theory

    • Petter L. Skantze, Marija D. Ilic
    Pages 7-29

  4. Overview of the Competitive Electricity Industry

    • Petter L. Skantze, Marija D. Ilic
    Pages 31-40

  5. Arbitrage Pricing and the Temporal Relationship of Electricity Prices

    • Petter L. Skantze, Marija D. Ilic
    Pages 41-51

  6. Building a Price Model for Electricity Markets

    • Petter L. Skantze, Marija D. Ilic
    Pages 53-60

  7. A Bid-based Stochastic Model for Electricity Prices

    • Petter L. Skantze, Marija D. Ilic
    Pages 61-111

  8. Optimal Futures Market Strategies for Energy Service Providers

    • Petter L. Skantze, Marija D. Ilic
    Pages 113-133

  9. Valuing Generation Assets

    • Petter L. Skantze, Marija D. Ilic
    Pages 135-148

  10. Modeling Locational Price Differences

    • Petter L. Skantze, Marija D. Ilic
    Pages 149-175

  11. Investment Dynamics and Long Term Price Trends in Competitive Electricity Markets

    • Petter L. Skantze, Marija D. Ilic
    Pages 177-191

  12. Conclusion

    • Petter L. Skantze, Marija D. Ilic
    Pages 193-195

  13. Back Matter

    Pages 197-214
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Keywords

About this book

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.

Authors and Affiliations

  • Caminus Corporation, USA

    Petter L. Skantze

  • Massachusetts Institute of Technology, USA

    Marija D. Ilic

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