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Trading Forward in the Brazilian Electricity Market

Author

Listed:
  • Paulo Cesar Coutinho

    (Department of Accounting, University of Brasilia, Brasilia, Brazil)

  • Andre Rossi de Oliveira

    (Finance and Economics Department, Woodbury School of Business, Utah Valley University, Orem, UT, USA)

Abstract

We study the interaction between forward and spot electricity markets in a scenario where buyers and sellers are price takers in the forward market and trade through marketers, who play a Cournot game. Our model s main features come from the Brazilian electricity market, where a free contract market coexists with a regulated contract market, and the spot price is the output of a stochastic dynamic algorithm. We are able to show that the price of energy bought (sold) forward decreases (increases) with the number of marketers, and that, as a result, full hedging is achieved in the limit. We also investigate the effects on prices of changes in the number of market participants and in aggregate consumption and supply, an exercise that yields important policy recommendations for the Brazilian regulator.

Suggested Citation

  • Paulo Cesar Coutinho & Andre Rossi de Oliveira, 2013. "Trading Forward in the Brazilian Electricity Market," International Journal of Energy Economics and Policy, Econjournals, vol. 3(3), pages 272-287.
    • Handle: RePEc:eco:journ2:2013-03-8
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    References listed on IDEAS

    as
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    Cited by:

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    4. Marin s Taffarel & Wesley Vieira da Silva & Ademir Clemente & Claudimar Pereira da Veiga & Jansen Maia Del Corso, 2015. "The Brazilian Electricity Energy Market: The Role of Regulatory Content Intensity and Its Impact on Capital Shares Risk," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 288-304.
    5. Daglish, Toby & de Bragança, Gabriel Godofredo Fiuza & Owen, Sally & Romano, Teresa, 2021. "Pricing effects of the electricity market reform in Brazil," Energy Economics, Elsevier, vol. 97(C).
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    More about this item

    Keywords

    Forward and spot markets; marketers; Brazilian electricity market; Cournot; hedging;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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