Hedging and Vertical Integration in Electricity Markets

• 成果类型: Article
• 署名作者: Aid, Rene; Chemla, Gilles; Porchet, Arnaud; Touzi, Nizar
• 署名单位: Imperial College London; Centre for Economic Policy Research - UK; Universite PSL; Universite Paris-Dauphine; Universite PSL; Universite Paris-Dauphine; Institut Polytechnique de Paris; Ecole Polytechnique; ENSTA Paris
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.1110.1357
• 发表日期: 2011
• 页码: 1438-1452
• 关键词: Corporate finance; industries; electric-electronic; Financial institutions; MARKETS; asset pricing

摘要

This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and vertical integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical integration on prices, risk premia, and retail market shares. We point out that forward hedging and vertical integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market.