Structural model for electricity spot and forward coupled markets
Event details
| Date | 03.05.2016 |
| Hour | 12:00 › 13:00 |
| Speaker | Clémence ALASSEUR (EDF – FIME Finance for Energy Market Research Center) |
| Location | |
| Category | Conferences - Seminars |
A major trend on European electricity markets is integration. On November 2010, market coupling is launched on day-ahead market on zone CWE (Central West Europe) which gathers five countries (France, Germany, Netherlands, Belgium and Luxembourg). And lately, in 2014, market coupling has been extended to a much larger zone which represents around 75% of European demand.
In 2013, during 15 % of time, spot price was unique on CWE region which means that no congestion occurred at interconnections and that market price was determined as if the five countries were only one. In 2014, market prices were the same in France and Germany around 50% of time. As such, modeling electricity prices on a single country without considering market coupling prevents from fitting some key characteristics of the realized price signals.
Price models are extensively used for risk management purpose to evaluate portfolio positions, value and risk indicators. To produce accurate indicators, price models must be coherent between the spot and the forward. We propose a new structural model for electricity spot and forward: the case of coupled markets on two zones with several fuels. We choose a structural approach in which enables to represent some key characteristics of spot prices. Our model has the particularity to consider two market zones and the limited interconnection linking the two. Explicit formulas are also available for forward prices which enable easy computation for both spot and forward prices. We give some illustrative results of spot and forward behavior and of transmission rights pricing.
In 2013, during 15 % of time, spot price was unique on CWE region which means that no congestion occurred at interconnections and that market price was determined as if the five countries were only one. In 2014, market prices were the same in France and Germany around 50% of time. As such, modeling electricity prices on a single country without considering market coupling prevents from fitting some key characteristics of the realized price signals.
Price models are extensively used for risk management purpose to evaluate portfolio positions, value and risk indicators. To produce accurate indicators, price models must be coherent between the spot and the forward. We propose a new structural model for electricity spot and forward: the case of coupled markets on two zones with several fuels. We choose a structural approach in which enables to represent some key characteristics of spot prices. Our model has the particularity to consider two market zones and the limited interconnection linking the two. Explicit formulas are also available for forward prices which enable easy computation for both spot and forward prices. We give some illustrative results of spot and forward behavior and of transmission rights pricing.
Practical information
- Informed public
- Free