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A Speculative Trading Model for the Electricity Market: Based on Japan Electric Power Exchange

Author

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  • Jun Maekawa

    (Ritsumeikan Global Innovation Research Organization (R-GIRO), Ritsumeikan University, 1-1-1 Noji-higashi, Kusatsu, Shiga 525-8577, Japan)

  • Koji Shimada

    (Faculty of Economics, Ritsumeikan University, 1-1-1 Noji-higashi, Kusatsu, Shiga 525-8577, Japan)

Abstract

Renewable energy sources produce less environmental impact and have little marginal cost. Thus, because of these characteristics, it is desirable to disseminate it for the purpose of economic efficiency. Because of the uncertainty in the supply of renewable energy and the special feature of electricity as a good, such as merit order curve, introducing forward markets is an essential factor in a liberalized market. In European countries, which have already established several mechanisms for managing liquidity including markets with several timelines, the market liquidity invites the investor to perform some speculative action. We present a simple electric power market model to analyze the speculative actions of electricity suppliers and the price effect of such actions. Moreover, we found that the speculative action improves the inelasticity of the demand in electricity market.

Suggested Citation

  • Jun Maekawa & Koji Shimada, 2019. "A Speculative Trading Model for the Electricity Market: Based on Japan Electric Power Exchange," Energies, MDPI, vol. 12(15), pages 1-15, July.
    • Handle: RePEc:gam:jeners:v:12:y:2019:i:15:p:2946-:d:253507
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    References listed on IDEAS

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    Cited by:

    1. Kanamura, Takashi & Bunn, Derek W., 2022. "Market making and electricity price formation in Japan," Energy Economics, Elsevier, vol. 107(C).
    2. Talat S. Genc & Stephen Kosempel, 2023. "Energy Transition and the Economy: A Review Article," Energies, MDPI, vol. 16(7), pages 1-26, March.

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