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Analyzing the Dynamic Impact of Electricity Futures on Revenue and Risk of Renewable Energy in China

Author

Listed:
  • Yue Zhang

    (China University of Petroleum)

  • Arash Farnoosh

    (IFPEN - IFP Energies nouvelles)

Abstract

Though the electricity market in China has gone through several reforms in the last few decades, the market is still not completely liberalized. The wholesale prices are regulated and for renewable it is based on feed-in tariff; there is not yet a competitive spot or derivative market concerning the generation side. Furthermore, with great potential, renewable energy is being gradually promoted by the government to compete freely with conventional energies. However, it is hard for a renewable generator to survive without subsidy. So, in this paper we propose a new round of revolution in power sector to introduce electricity futures into China with the expectation of perfecting the market and providing a proper hedging tool for renewable plants. We make an estimation of the risk premium and then simulate the futures prices in China's market. To support the establishment of the futures contracts, we also propose two pricing mechanisms: Demand-side price & Opportunity cost price and study their effects on the futures. Finally, some suggestions with regard to the construction of futures market in China and the operational strategy for renewable plants are given.

Suggested Citation

  • Yue Zhang & Arash Farnoosh, 2019. "Analyzing the Dynamic Impact of Electricity Futures on Revenue and Risk of Renewable Energy in China," Post-Print hal-02264847, HAL.
    • Handle: RePEc:hal:journl:hal-02264847
    DOI: 10.1016/j.enpol.2019.06.011
    Note: View the original document on HAL open archive server: https://ifp.hal.science/hal-02264847
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    Citations

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    Cited by:

    1. Li, Yi & Liu, Tianya & Xu, Jinpeng, 2023. "Analyzing the economic, social, and technological determinants of renewable and nonrenewable electricity production in China: Findings from time series models," Energy, Elsevier, vol. 282(C).
    2. Deqin Lin & Wenyang Deng & Siting Dai, 2022. "A Margin Design Method Based on the SPAN in Electricity Futures Market Considering the Risk of Power Factor," Energies, MDPI, vol. 15(14), pages 1-14, July.
    3. Zhang, Lihong & Wang, Jun & Wang, Bin, 2020. "Energy market prediction with novel long short-term memory network: Case study of energy futures index volatility," Energy, Elsevier, vol. 211(C).
    4. Li, Yanxue & Zhang, Xiaoyi & Gao, Weijun & Ruan, Yingjun, 2020. "Capacity credit and market value analysis of photovoltaic integration considering grid flexibility requirements," Renewable Energy, Elsevier, vol. 159(C), pages 908-919.
    5. Wang, Kai-Hua & Su, Chi-Wei & Lobonţ, Oana-Ramona & Moldovan, Nicoleta-Claudia, 2020. "Chinese renewable energy industries’ boom and recession: Evidence from bubble detection procedure," Energy Policy, Elsevier, vol. 138(C).

    More about this item

    Keywords

    Spot Prices; Electricity Market; Futures Prices; Hedging Strategy;
    All these keywords.

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