Slides are now available from the electricity seminar held 15 November
Click here to view slide presentation of the following seminar presented by Gabriel Fiuza, doctoral candidate:
Tuesday 15 November 2011
Rutherford House, Lecture Theatre 3
Pipitea Campus, Victoria University, Wellington
12.15pm - 1.30pm
This is a free seminar. Tea and coffee will be provided from 12.15, seminar to commence at 12.30pm.
THE ROLE OF UNCERTAINTY ON HEDGING AND ELECTRICITY SPOT MARKET POWER
The exertion of market power in electricity wholesale markets is an issue of great academic and practical debate. In particular, the role of a given amount of hedge on market power has been of considerable interest. However, the relationship between risk management, spot market power and hedge pricing has not yet received proper attention. The model discussed in this presentation incorporates NZEM features such as demand and cost uncertainty, risk aversion, oligopoly, vertical integration and uniform-price auctions and analyses the effect of volatility on hedging decisions, forward prices and market power. In particular, we show that usual electricity spot market power measures such as the Lerner Index are not only affected by conduct but also by stochastic variables that influence demand and costs. In other words, in highly concentrated electricity markets with forward contracts, the usual measure of market power can reflect risk management instead of solely oligopolistic conduct. The results are illustrated with actual NZEM data.
Gabriel Fiuza is a PhD candidate in Economics at Victoria University of Wellington/ISCR and a researcher with the Brazilian Institute of Applied Economics Research (IPEA). He has studied the determinants of electricity spot and forward prices and the implications of uncertainty and market power on hedging and investment decisions during his doctoral studies. This seminar is based on his PhD thesis supported by ISCR.
If you would like to attend this seminar please contact: kathy.mckenzie@vuw.ac.nz or phone: (04) 463-5562