On the Compensation of Oversupply in Electricity Markets

We have investigated additional core business activities for a municipal to overcome the oversupply in the electricity production.  The core contribution is seen in the valuation of flexible production and consumption units with respect to the short power markets. Risk assessment relies on distributional assumptions. Flexible consumers and producers of electricity can earn a flexibility premiums in the spot markets for electricity with the equivalent of the Delta hedge premium as the optimum given the respective price dynamics. By the end of the year 2016, we will have developed a tool, which allows to optimize the management of flexible storage capacities, which provide a basis to design incentive schemes for end costumers for adapting their loading strategies to the short term price fluctuations in the spot market.