Trading Forward in the Brazilian Electricity Market


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Authors

  • Paulo Cesar Coutinho Universidade de Brasilia
  • Andre Rossi de Oliveira

Abstract

We study the interaction between forward and spot electricity markets in a scenario where buyers and sellers are price takers in the forward market and trade through marketers, who play a Cournot game. Our model’s main features come from the Brazilian electricity market, where a free contract market coexists with a regulated contract market, and the spot price is the output of a stochastic dynamic algorithm. We are able to show that the price of energy bought (sold) forward decreases (increases) with the number of marketers, and that, as a result, full hedging is achieved in the limit. We also investigate the effects on prices of changes in the number of market participants and in aggregate consumption and supply, an exercise that yields important policy recommendations for the Brazilian regulator. Keywords: Forward and spot markets; marketers; Brazilian electricity market; Cournot; hedging. JEL Classifications: C61; C72; G10; L13; L94

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Author Biographies

Paulo Cesar Coutinho, Universidade de Brasilia

Department of Accounting University of Brasilia, Brasilia, Brazil

Andre Rossi de Oliveira

Associate ProfessorFinance and Economics DepartmentWoodbury School of Business

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Published

2013-06-18

How to Cite

Coutinho, P. C., & Oliveira, A. R. de. (2013). Trading Forward in the Brazilian Electricity Market. International Journal of Energy Economics and Policy, 3(3), 272–287. Retrieved from https://www.econjournals.com/index.php/ijeep/article/view/499

Issue

Vol. 3 No. 3 (2013)

Section

Articles

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