Rene Aid, Professor of Economics at Paris-Dauphine University, will present the following talk.
Equilibrium Price in Intraday Electricity Markets
We formulate an equilibrium model of intraday trading in electricity markets. Agents face balancing constraints between their customers' consumption plus intraday sales and their production plus intraday purchases. They have continuously updated forecasts of their customers' consumption at maturity with decreasing volatility error. Forecasts are prone to idiosyncratic noise as well as common noise (weather). Agents' production capacities are subject to independent random outages, which are each modelled by a Markov chain. The equilibrium price is defined as the price that minimises trading cost plus imbalance cost of each agent and satisfies the usual market clearing condition. Existence and uniqueness of the equilibrium are proved, and we show that the equilibrium price and the optimal trading strategies are martingales. We also show that (i) When there is no uncertainty on generation, the market price is a convex combination of forecasted marginal cost of each agent, with deterministic weights. (ii) Heterogeneity across agents is a necessary condition for the Samuelson’s effect to hold. (iii) When there is production uncertainty, the price volatility becomes stochastic but converges to the case without production uncertainty when the number of agents becomes large. Joint work with Andrea Cosso and Huyên Pham.
Professor of Economics at Paris-Dauphine University since 2016 and lecturer at the Ecole Polytechnique (2015-2018), Africa Business School Affiliate since 2019. EDF R&D research-engineer in financial economics of energy markets (1998-2003) and manager (2003-2006). Co-founder and Director (2006-2013) of the Finance for Energy Markets Research Initiative. Deputy-Director of EDF R&D Research department on generation and financial risk management (2014-2016). Plenary speaker at the World Congress Bachelier Finance Society (2018). Author of the monography Electricity Derivatives, Springer, 2015. Co-editor of the book Commodities, Energy and Environmental Finance, Fields Institute Communications, Springer, 2015. Holder of a patent on demand response management. Director of the Dauphine Master Degree Digital Economics.
NYU Students are highly encouraged to attend in person. All other non-NYU guests are invited to attend virtually unless otherwise noted.
Meeting ID: 960 5443 4255