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The Electricity Contract Market

Author

Listed:
  • Green, R.

Abstract

In England and Wales, wholesale electricity is sold in a spot market partly covered by long-term contracts which hedge the spot price. Two dominant conventional generators can raise spot prices to undesirable levels, which is profitable in the absence of contracts. If fully hedged, however, the generators lose their incentive to raise prices above marginal costs. Competition in the contract market could lead the generators to sell contracts for much of their output. Since privatisation, the generators have indeed covered most of their sales in the contract market.

Suggested Citation

  • Green, R., 1996. "The Electricity Contract Market," Cambridge Working Papers in Economics 9616, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:9616
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    Citations

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    Cited by:

    1. Jordi Brandts & Paul Pezanis‐Christou & Arthur Schram, 2008. "Competition with forward contracts: a laboratory analysis motivated by electricity market design," Economic Journal, Royal Economic Society, vol. 118(525), pages 192-214, January.
    2. Newbery, David M., 1997. "Privatisation and liberalisation of network utilities," European Economic Review, Elsevier, vol. 41(3-5), pages 357-383, April.
    3. Michael Wyman, 2008. "Power Failure: Addressing the Causes of Underinvestment, Inefficiency and Governance Problems in Ontario's Electricity Sector," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 261, May.
    4. David M. Newbery & Thomas Greve, 2013. "The Strategic Robustness of Mark-up Equilibria," Cambridge Working Papers in Economics 1341, Faculty of Economics, University of Cambridge.
    5. Martin Kreuzberg & Christoph Riechmann, 1999. "Deregulation and Regulation in the European Power Market," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 68(4), pages 566-578.
    6. Frank Wolak, 2000. "An Empirical Analysis of the Impact of Hedge Contracts on Bidding Behavior in a Competitive Electricity Market," International Economic Journal, Taylor & Francis Journals, vol. 14(2), pages 1-39.
    7. Frank A. Wolak, 2001. "An Empirical Analysis of the Impact of Hedge Contracts on Bidding Behavior," NBER Working Papers 8212, National Bureau of Economic Research, Inc.
    8. Gasmi, Farid & Oviedo, Juan Daniel, 2009. "Investment in Transport Infrastructure, and Gas-Gas Competition," TSE Working Papers 09-121, Toulouse School of Economics (TSE).
    9. repec:bla:ausecr:v:41:y:2008:i:4:p:349-370 is not listed on IDEAS
    10. Peter Cramton & Robert Wilson, 1998. "A Review of ISO New England's Proposed Market Rules," Papers of Peter Cramton 98mdi, University of Maryland, Department of Economics - Peter Cramton.
    11. Kennedy, David, 2002. "Regulatory reform and market development in power sectors of transition economies: the case of Kazakhstan," Energy Policy, Elsevier, vol. 30(3), pages 219-233, February.
    12. Hugh Rudnick & Juan-Pablo Montero, 2002. "Second Generation Electricity Reforms in Latin America and the California Paradigm," Journal of Industry, Competition and Trade, Springer, vol. 2(1), pages 159-172, June.
    13. Bower, John & Bunn, Derek, 2001. "Experimental analysis of the efficiency of uniform-price versus discriminatory auctions in the England and Wales electricity market," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 561-592, March.
    14. Sandro Sapio & Agnieszka Wylomanska, 2008. "The impact of forward trading on the spot power price volatility with Cournot competition," HSC Research Reports HSC/08/02, Hugo Steinhaus Center, Wroclaw University of Technology.
    15. Lowrey, Craig, 1997. "The pool and forward contracts in the UK electricity supply industry," Energy Policy, Elsevier, vol. 25(4), pages 413-423, March.

    More about this item

    Keywords

    OLIGOPOLIES; ELECTRICITY; CONTRACTS;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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