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Load-Following Forward Contracts

Author

Listed:
  • Brown, David P.

    (University of Alberta, Department of Economics)

  • Sappington, David E.M.

    (University of Florida)

Abstract

Load-following forward contracts (LFFCs) are becoming increasingly popular in the electricity sector. A LFFC obligates an electricity supplier to deliver at a pre specified unit price a fraction of the buyer's ultimate demand for electricity. We show that relative to more standard ("swap") forward contracts, LFFCs can increase the expected wholesale price of electricity and thereby reduce expected consumer surplus and welfare.

Suggested Citation

  • Brown, David P. & Sappington, David E.M., 2020. "Load-Following Forward Contracts," Working Papers 2020-14, University of Alberta, Department of Economics, revised 31 Dec 2021.
    • Handle: RePEc:ris:albaec:2020_014
    as

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    File URL: https://sites.ualberta.ca/~econwps/2020/wp2020-14.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    load-following forward contracts; swap contracts; electricity sector;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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