2011

Strategic Forward Contracting in the Wholesale Electricity Market

Reprint No. 2011:5

Author(s): Pär HolmbergYear: 2011 Title: Energy Journal Volume (No.): 32 (1) Pages: 169–202
Online article (restrictions may apply)

This paper analyses a wholesale electricity market with supply function competition. Trade in the forward and spot markets is represented by a two-stage game, and its subgame perfect Nash equilibrium (SPNE) is characterized. It is verified that increased forward sales of a producer constitute a credible commitment to aggressive spot market bidding. The paper identifies market situations when this pro-competitive commitment is unilaterally profitable for the producer. It is also proven that a producer has incentives to sell in the forward market in order to reduce competitors' forward sales, which softens their spot market offers.

Reference:
Holmberg, Pär (2011), "Strategic Forward Contracting in the Wholesale Electricity Market". Energy Journal 32(1), 169–202.

Pär Holmberg

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An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

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The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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