The Impact of type of production and Time to Maturity on Electricity Forward Premiums

摘要

Nowadays many wholesale energy markets are deregulated and this expressesitself in enormous price-fluctuation, reflected by high volatilityin day-ahead electricity markets; higher than in many other commoditymarkets. This is due to the non-storability of electricity. The nonstorabilityof electricity has important implications on the valuation offorward contracts. Fama and French (1987) discuss the prices of forwardcontracts on commodities in relation to storability. For storablecommodities, forward prices reflect the current spot price, foregoneinterest income, storage costs, and a convenience yield, whereas theforward price reflects the expected spot price during the delivery periodand a risk premium for non-storable commodities. In this paperwe focus on the risk premiums and expected spot prices embedded inelectricity forward prices as a function of time to maturity and thefuel mix. We find substantial variation in the risk premium over countriesthat differ in the way they produce electricity and find empiricalsupport for the Samuelson effect.