Risk management strategy based on price swap for generation companies in electricity market environment

Abstract

Electricity spot market is one of the commodity markets having high price volatility, which may expose participants to various types of risk. Subject to different risk preference and comparative advantage, participants can make use of power price swap as an effective tool to hedge the power price volatility risk. This paper presents a power price swap risk-hedging model based on swap tool in finance market and utility theory. It explains how the price swap can be used to hedge risk in open electricity market. Example of analysis is included to show the effect of the swap-based tool in cases of high price volatility market and different risk-taking profile of the utilities. 电力现货交易市场属于实物交易市场的一种,具有很高的价格波动性,给市场参与者带来风险;考虑市场参与者不同的风险偏好和比较优势,利用电力价格互换,对冲电力价格波动的风险.首先介绍了金融市场和效用理论学科中应用较多的互换工具,并以此为基础建立了电力价格互换的风险对冲模型,解释了在开放的电力市场中如何利用价格互换来对冲风险,最后用算例分析表明价格互换工具可以有效地用于价格波动剧烈的市场中的风险控制,也可以作为电力公司不同的风险组合策略.