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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Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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