[Back]

R. Kovacevic:
"Valuation and Pricing of Electricity Delivery Contracts - the Producer´s View";
Talk: 27th European Conference on Operational Research, Glasgow (invited); 2015-07-12 - 2015-07-15.

This paper analyzes valuation and pricing of physical electricity delivery contracts. Values and prices should be consistent to production and fuel storage capacities. Using stochastic optimization problems in discrete time with general state space, the duals of production problems are used to derive no-arbitrage conditions for fuel and electricity prices as well as superhedging values and prices of OTC electricity delivery contracts. In articular we take the perspective of an electricity producer,
serving contractual deliveries but avoiding unacceptable losses
at the end of the planning horizon. The resulting no-arbitrage conditions, stochastic discount factors and superhedging prices account for typical frictions like limitation of storage and production capacity and for the fact that it is possible to produce electricity from fuel, but not to produce fuel from electricity. Similarities, but also substantial differences
to purely financial results can be demonstrated in this way.
Finally, using acceptability measures we analyze capital requirements and acceptability prices for delivery contracts, where the producer accepts some risk.