Generation Adequacy via Call Options Obligations: Safe Passage to the Promised Land
Journal Article
·
· Electricity Journal
In contrast to the controversial LICAP, the author's plan relies on standard hedging instruments that a mature energy-only market can support without regulatory intervention. Unlike payments for an artificial capacity product, for which there is no natural demand, energy call options provide intrinsic value to customers, since the generators who are paid for such options must pay back any windfall profits. This amounts to a risk trading arrangement where the consumers assume some of the investment risk, in exchange for reducing their price risk.
- OSTI ID:
- 20677743
- Journal Information:
- Electricity Journal, Vol. 18, Issue 9; Other Information: Elsevier Ltd. All rights reserved; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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