PRICE FORMATION IN ELECTRICITY FORWARD MARKETS – BAD EXPECTATIONS OF RISK AVERSE MARKET ACTORS?

摘要

Since the liberalisation of the European electricity sector, forward and futures contracts have gained significant interest of market participants due to risk management reasons. For pricing of these contracts an important fact concerns the non-storability of electricity. Therefore, forward prices are related to expected spot prices which are built on fundamental market expectations. In the following article the crucial impact parameters of forward electricity prices and the relationship between futures and spot prices will be assessed by an empirical analysis of electricity prices at the European Energy Exchange and the Nord Pool Power Exchange. In fact, price formation in the considered markets is influenced by historic spot market prices yielding a biased forecasting power of long-term contracts.