Related papers: Risk aversion in flexible electricity markets
An agent choosing between various actions tends to take the one with the lowest cost. But this choice is arguably too rigid (not adaptive) to be useful in complex situations, e.g., where exploration-exploitation trade-off is relevant in…
Investments into renewable energy are increasing rapidly around the world. Energy system models are able to provide insights into optimal investment capacities and thus are widely used to aid the long-term investment decision-making under…
Arbitrage is one important revenue source for energy storage in electricity markets. However, a large amount of storage in the market will impact the energy price and reduce potential revenues. This can lead to strategic behaviors of…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
This paper presents a scenario based robust optimization framework for short term energy scheduling in electricity intensive industrial plants, explicitly addressing uncertainty in planning decisions. The model is formulated as a two-stage…
The uncertainty in the power supply due to fluctuating Renewable Energy Sources (RES) has severe (financial and other) implications for energy market players. In this paper, we present a device-level Demand Response (DR) scheme that…
We propose an enhancement to wholesale electricity markets whereby the exposure of consumers to increasingly large and volatile consumer payments arising as a byproduct of volatile real-time net loads -- i.e., loads minus renewable outputs…
Over the last few decades, electricity markets around the world have adopted multi-settlement structures, allowing for balancing of supply and demand as more accurate forecast information becomes available. Given increasing uncertainty due…
In the context of energy transition, industrial plants that heavily rely on electricity face more and more price volatility. To continue operating in these conditions, the directors become continually more willing to increase their…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
High shares of variable renewable energy necessitate substantial energy storage capacity. However, it remains unclear how to design a market that, on the one hand, ensures a stable and sufficient income for storage firms, and, on the other…
While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…
Renewable energy has attracted significant attention over the last decade, conceivably due to its environmental benefits and the recent drops in the development and deployment cost of the technology. The increase in renewable generation,…
The transition to a fully decarbonised electricity system depends on integrating new technologies that ensure reliability alongside sustainability. However, missing risk markets hinder investment in reliability-enhancing technologies by…
Risk aversion is a key element of utility maximizing hedge strategies; however, it has typically been assigned an arbitrary value in the literature. This paper instead applies a GARCH-in-Mean (GARCH-M) model to estimate a time-varying…
Is the elasticity of intertemporal substitution (EIS) more or less than one? This question can be answered by confronting theoretical results of asset pricing models with investor behaviour during episodes of stock market panic. If we…
To achieve ambitious greenhouse gas emission reduction targets in time, the planning of future energy systems needs to accommodate societal preferences, e.g. low levels of acceptance for transmission expansion or onshore wind turbines, and…
Load-serving entities which procure electricity from the wholesale electricity market to service end-users face significant quantity and price risks due to the volatile nature of electricity demand and quasi-fixed residential tariffs at…
To phase-out fossil fuels, energy systems must shift to renewable electricity as the main source of primary energy. In this paper, we analyze how electrification can support the integration of fluctuating renewables, like wind and PV, and…
The capacity market provides economic guidance for generation investment and ensures the adequacy of generation capability for power systems. With the rapidly increasing proportion of renewable energy, the adequacy of flexibility and…