Bidding of flexible reservoir hydropower in day-ahead (spot) auctions needs to be done under uncertainty of electricity prices and inflow to reservoirs. The presence of reservoirs also means that the short-term problem of determining bids for the next 12–36 hours is a part of a long term...

When evaluating whether to refurbish existing hydropower plants or invest in a new power plant, there are two important aspects to take into consideration. These are the capacity chosen for the production facilities and the timing of the investment. This paper presents an investment decision...

We analyze investments in gas-fired power plants under stochastic electricity and natural gas prices. A simple but realistic two-factor model is used for price processes, enabling analysis of the value of operating flexibility, the opportunity to abandon the capital equipment, as well as finding...

Multi-period guarantees are often embedded in life insurance contracts. In this paper we consider the problem of hedging these multi-period guarantees in the presence of transaction costs. We derive the hedging strategies for the cheapest hedge portfolio for a multi-period guarantee that with...

This paper presents a method for assessing small hydropower projects that are subject to uncertain electricity prices. We present a real options-based method with continuous scaling, and we find that there is a unique price limit for initiating the project. If the current electricity price is...

In contrast to forwards and futures on storable commodities, prices of long-term electricity forwards exhibit a dynamics different to that of short-term and mid-term prices. We model long-term electricity forward prices through demand and supply for electricity, adjusted with a risk premium....

In this paper we develop an optimization model to derive static hedge positions for hydropower producers with different risk characteristics. Previous research has primarily considered dynamic hedging; however, static hedging is the common choice among hydropower producers because of its...

Concerns with CO2 emissions are creating incentives for the development and deployment of energy technologies that do not use fossil fuels. Indeed, such technologies would provide tangible benefits in terms of avoided fossil-fuel costs, which are likely to increase as restrictions on CO2...

Natural gas flows in pipelines as a consequence of the pressure difference at the inlet and outlet. Adjusting these pressures makes it possible to inject natural gas at one rate and withdraw at a different rate, hence using the pipeline as storage as well as transport. We study the value of...

We analyze risk management trends in electricity commodity markets using the production and transaction data and written hedging policies of 12 Norwegian hydropower companies. The scope of our analysis is the hedging of physical electricity production using the power derivatives available at...