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Article

Modeling and Managing Joint Price and Volumetric Risk for Volatile Electricity Portfolios

1
Next Kraftwerke GmbH, 50825 Cologne, Germany
2
Faculty of Management, Economics and Social Sciences, University of Cologne, 50923 Cologne, Germany
3
Institute of Energy Economics, University of Cologne, 50827 Cologne, Germany
*
Author to whom correspondence should be addressed.
These authors contributed equally to this work.
Energies 2020, 13(14), 3578; https://doi.org/10.3390/en13143578
Received: 28 January 2020 / Revised: 11 June 2020 / Accepted: 3 July 2020 / Published: 11 July 2020
(This article belongs to the Special Issue Operation, Regulation and Planning of Power and Natural Gas Systems)
With an increasing share of renewable energy resources participating in electricity markets, there is a growing dependence between renewable power production and clearing prices of spot markets. Modeling this dependence using bivariate analysis can result in underestimation of market risks and adverse effects for stakeholders’ risk management. To enable an undistorted risk assessment, we are using a copula approach to precisely and jointly model electricity prices and infeed volumes of wind power. We simulate the case of wind farm operators using power purchase agreements (PPAs) to shift the price risk to an energy trader, who integrates the infeed into its portfolio. The trader’s portfolio can either be geographically dispersed, or highly localized. Based on its portfolio, the energy trader can decide to use derivatives such as futures to manage its risk exposure. The trader decides on future volumes subject to its portfolio’s inherent volatility. With a given risk averse strategy, a sufficiently diverse portfolio can help reduce the necessity to trade futures and subsequently the disadvantage of having to pay potential risk premiums. View Full-Text
Keywords: portfolio; portfolio management; risk; risk assessment; energy trading; power purchase agreements; PPA; copula portfolio; portfolio management; risk; risk assessment; energy trading; power purchase agreements; PPA; copula
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MDPI and ACS Style

Kaufmann, J.; Kienscherf, P.A.; Ketter, W. Modeling and Managing Joint Price and Volumetric Risk for Volatile Electricity Portfolios. Energies 2020, 13, 3578. https://doi.org/10.3390/en13143578

AMA Style

Kaufmann J, Kienscherf PA, Ketter W. Modeling and Managing Joint Price and Volumetric Risk for Volatile Electricity Portfolios. Energies. 2020; 13(14):3578. https://doi.org/10.3390/en13143578

Chicago/Turabian Style

Kaufmann, Johannes, Philipp A. Kienscherf, and Wolfgang Ketter. 2020. "Modeling and Managing Joint Price and Volumetric Risk for Volatile Electricity Portfolios" Energies 13, no. 14: 3578. https://doi.org/10.3390/en13143578

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