Research On Medium And Long-term Financial Risk Of Electricity Price In Electricity Markets

Electric power industries are undergoing restructuring all over the world. While the details differ, the essence is of one accord that is introduction of competition into the conventional electricity generation suppliers. With the developing of the worldwide reform of electricity market, the participants of the market have been encountering unprecedented market risk, especially huge financial risk evoked by the price fluctuations. Thereby, the issue of establishing an effective mechanism to avoid the risk in the electricity market need to be studied and solved urgently so as to make the reform further proceed smoothly.The paper derives System Price Capacity Percent from the relation between price and system capacity and analyzes of the price spiking phenomenon in Zhejiang electricity. The result indicates that the electricity generation suppliers' relevant tactic, which is made according to the power's inherent characteristic that is impossible to deposit on a large scale and the requirement of the system that is the power in system should be kept balance, the phenomenon of price spiking emerges.To avoid the medium and long-term electricity price financial risk, the paper has introduced the medium and long-term contract trades such as electricity forward contracts, electricity contract for differences and electricity futures.According to the present situation the paper proposes the forward options model which is based on the forward contracts, and analyses some attractive trading strategies involving the forward options in detail. The conclusion makes clear that the various trade strategies of forward option will not only bring much more profit or loss combination, but will be better for the trade and spot price. It also reduces the market risk produced by uncertain factors such as price and load. Furthermore it is good at improving the controllability and strengthening the stabilization of price.