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Erschienen in:
Energy Markets Kapitel lesen Erstes Kapitel lesen

2013 | OriginalPaper | Buchkapitel

13. Copula-Based Hedge Ratios for Renewable Power Generation

verfasst von : Audun Nordtveit, Kim T. Watle, Stein-Erik Fleten

Erschienen in: Handbook of Risk Management in Energy Production and Trading

Verlag: Springer US

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Abstract

The electricity price and production volume determine the revenue of a renewable electricity producer. Feed-in variations to power plants and high price volatility result in significant cash flow uncertainty. A copula-based Monte Carlo model is used to relate price and production volume and to find optimal hedge ratios through minimization of risk measures such as variance, hedge effectiveness, cash flow at risk, and conditional cash flow at risk. In our case study, all risk measures argue for an optimal hedge ratio between 35 and 60% of expected production. The highest risk reduction is achieved by the use of forward contracts with long time to maturity but at the expense of a low risk premium. Conversely, short-term futures and forwards only provide marginal risk reduction, but can yield attractive positive risk premiums. These findings underline the importance of distinguishing the use of derivative contracts for speculation and hedging purposes, through positions in short-term and long-term contracts, respectively.

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Vorheriges Kapitel Renewable Energy and Its Impact on Power Markets
Nächstes Kapitel Investment in Stochastic Electricity-Production Facilities
Fußnoten
1
Cash flow at risk and conditional cash flow at risk.
 
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Metadaten
Titel
Copula-Based Hedge Ratios for Renewable Power Generation
verfasst von
Audun Nordtveit
Kim T. Watle
Stein-Erik Fleten
Copyright-Jahr
2013
Verlag
Springer US
Buch
Handbook of Risk Management in Energy Production and Trading

Print ISBN: 978-1-4614-9034-0

Electronic ISBN: 978-1-4614-9035-7

Copyright-Jahr: 2013

DOI
https://doi.org/10.1007/978-1-4614-9035-7_13