Aspects of risk management in deregulated electricity markets : storage, market power and long-term contracts
Degree GrantorUniversity of Canterbury
Degree NameDoctor of Philosophy
This thesis considers the interaction of storage, gaming and forward contracts as mechanisms of risk management in a deregulated electricity market. To date, analyses of imperfect electricity markets have established the "tactical" effect of contracts, that under certain conjectural assumptions, forward contracts have a significant impact on the gaming behaviour of dominant firms in the spot market. However, little work has considered contract strategy, incorporating factors such as the feedback of spot market behaviour on contract market equilibria. This thesis assesses the risk that market participants are exposed to, establishes a measure of risk, and analyses the role that forward contracts play in hedging that risk. Finally, assuming participants are averse to financial risk only, a multi-period model will be provided that examines whether incentives exist for dominant suppliers to use their market power to amplify the risk faced by consumers in order to increase profit through contract revenue.