Abstract
Motivated by PJM’s recently proposed incentive scheme for capacity delivery during system emergencies, this paper develops two wholesale market products that a generator may use to manage the scheme’s risk. The first product is an insurance that removes the scheme’s downside risk due to the penalty for under-delivery. The second product is a forward contract that insulates a generator from the scheme’s risk due to the penalty for under-delivery and reward for over-delivery. The paper’s main contribution is how to price these newly developed products using readily available data. Copyright © 2022 Elsevier Inc.
| Original language | English |
|---|---|
| Article number | 107105 |
| Journal | The Electricity Journal |
| Volume | 35 |
| Issue number | 4 |
| Early online date | 11 Mar 2022 |
| DOIs | |
| Publication status | Published - May 2022 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 7 Affordable and Clean Energy -
SDG 9 Industry, Innovation, and Infrastructure
Keywords
- PJM
- Capacity market
- Incentive scheme
- Capacity delivery
- Risk management
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