Forward premia in electricity markets with fixed and flexible retail rates : replication and extension
Title: Forward premia in electricity markets with fixed and flexible retail rates : replication and extension
Author: VAN KOTEN, Silvester
Series/Number: EUI RSCAS; 2016/24
Bessembinder and Lemmon (2002) analyze forward premia in electricity markets when retail rates are fixed. I run both established and new simulations to replicate their findings for fixed tariffs and extend their analysis to flexible tariffs. Two of their four main predictions for fixed tariffs cannot be replicated, and their proposed regression, used in many empirical studies, seems not capable of reliably capturing the underlying relationships. Their predictions can mostly be extended to the case of flexible rates. The results of this study indicate that empirical studies should explicate if their data concern fixed or flexible rates and adjust their predictions accordingly.
Subject: Forward premia; Electricity markets; Energy economics; Mean power demand; Financial markets; G13; G17; L94; Q41
Type of Access: openAccess