Why the energy transition needs better forward markets

  • A contract that swapped a fixed amount of revenue for the half hourly wind generation multiplied by the half hourly spot price. This would eliminate the market risk for a wind farm. (Note, this is different to a standard Contract for Difference, which still leaves the investor exposed to the uncertainty in the quantity of wind generated.)
  • One that swapped a fixed amount of revenue for the half hourly solar generation multiplied by the half hourly spot price. This would eliminate the market risk for a solar farm.
  • One that swapped a fixed amount of revenue for the difference between the half hourly spot price and an index price (say the gas price), where this difference was positive. This would eliminate the market risk for a flexible generator.
  • One that swapped a fixed amount of revenue for the difference between the four highest spot prices each day and the four lowest spot prices each day. This would reduce the market risk for a battery owner.

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Guy Lipman

Guy Lipman

Fascinated by what makes societies and markets work, especially in sustainable energy. http://guylipman.com. Views not necessarily reflect those of my employer.