Department of Management

Forward contracts in electricity markets and capacity investment: A simulation study

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Forward contracts in electricity markets and capacity investment : A simulation study. / Álvarez-Uribe, Karla C.; Arango-Aramburo, Santiago; Larsen, Erik Reimer.

In: Utilities Policy, Vol. 54, No. October, 2018, p. 1-10.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Álvarez-Uribe, KC, Arango-Aramburo, S & Larsen, ER 2018, 'Forward contracts in electricity markets and capacity investment: A simulation study', Utilities Policy, vol. 54, no. October, pp. 1-10. https://doi.org/10.1016/j.jup.2018.07.003

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Author

Álvarez-Uribe, Karla C. ; Arango-Aramburo, Santiago ; Larsen, Erik Reimer. / Forward contracts in electricity markets and capacity investment : A simulation study. In: Utilities Policy. 2018 ; Vol. 54, No. October. pp. 1-10.

Bibtex

@article{2a712d72165747478b682195df79b101,
title = "Forward contracts in electricity markets and capacity investment: A simulation study",
abstract = "This simulation study analyzes the effect of the introduction of forward markets to mitigate cyclical price behavior in electricity markets from a dynamic extended Cobweb model. We pay particular attention to the effect of lags in investment decisions and the effect of not fully replacing retired capacity in electricity markets. In line with previous research, the introduction of forward markets decreases price variability in comparison to a spot market. However, we also observe that lags in investment decisions and the failure to fully replace retired capacity create capacity investments cycles even in the presence a forward market.",
keywords = "Cobweb model, Complexity, Cournot markets, Electricity markets, Forward markets, RATIONAL-EXPECTATIONS, PRICES, BEHAVIOR, STABILITY, Coumot markets, POWER MARKETS, COMPETITION, FUTURES MARKETS, CYCLES, DYNAMICS, ENGLAND",
author = "{\'A}lvarez-Uribe, {Karla C.} and Santiago Arango-Aramburo and Larsen, {Erik Reimer}",
year = "2018",
doi = "10.1016/j.jup.2018.07.003",
language = "English",
volume = "54",
pages = "1--10",
journal = "Utilities Policy",
issn = "0957-1787",
publisher = "Pergamon Press",
number = "October",

}

RIS

TY - JOUR

T1 - Forward contracts in electricity markets and capacity investment

T2 - A simulation study

AU - Álvarez-Uribe, Karla C.

AU - Arango-Aramburo, Santiago

AU - Larsen, Erik Reimer

PY - 2018

Y1 - 2018

N2 - This simulation study analyzes the effect of the introduction of forward markets to mitigate cyclical price behavior in electricity markets from a dynamic extended Cobweb model. We pay particular attention to the effect of lags in investment decisions and the effect of not fully replacing retired capacity in electricity markets. In line with previous research, the introduction of forward markets decreases price variability in comparison to a spot market. However, we also observe that lags in investment decisions and the failure to fully replace retired capacity create capacity investments cycles even in the presence a forward market.

AB - This simulation study analyzes the effect of the introduction of forward markets to mitigate cyclical price behavior in electricity markets from a dynamic extended Cobweb model. We pay particular attention to the effect of lags in investment decisions and the effect of not fully replacing retired capacity in electricity markets. In line with previous research, the introduction of forward markets decreases price variability in comparison to a spot market. However, we also observe that lags in investment decisions and the failure to fully replace retired capacity create capacity investments cycles even in the presence a forward market.

KW - Cobweb model

KW - Complexity

KW - Cournot markets

KW - Electricity markets

KW - Forward markets

KW - RATIONAL-EXPECTATIONS

KW - PRICES

KW - BEHAVIOR

KW - STABILITY

KW - Coumot markets

KW - POWER MARKETS

KW - COMPETITION

KW - FUTURES MARKETS

KW - CYCLES

KW - DYNAMICS

KW - ENGLAND

UR - http://www.scopus.com/inward/record.url?scp=85049783672&partnerID=8YFLogxK

U2 - 10.1016/j.jup.2018.07.003

DO - 10.1016/j.jup.2018.07.003

M3 - Journal article

AN - SCOPUS:85049783672

VL - 54

SP - 1

EP - 10

JO - Utilities Policy

JF - Utilities Policy

SN - 0957-1787

IS - October

ER -