The Study Of Competitive Electricity Price Volatility And Financial Derivatives Used To Control Electricity Price Volatility

Chinese government launched the second power system reform in 2015.The reform of the electricity pricing mechanism is an important part of this reform.However,compared with the deregulated power markets,China's power marketization is still very insufficient.The participants in the power market have not yet started to understand the competitive electricity price.In particular,the frequent and violent volatility of competitive electricity prices may lead to bankruptcy.China's power industry is in the early stage of market-oriented reform,and in the future China will inevitably apply renewable energy for electricity generation.In order to better integrate the status now and future development trends,this paper is based on the study of Swedish market and western Denmark market,which are developed electricity markets and with high penetration of renewable energy in electricity generation developed.And the high-frequency electricity spot price data in the initial stage and mature stage of the market construction are used respectively.By constructing the mean value recovery model,it is pointed out that the electricity price is high at the peak time(6:00 am-10:00 pm)and in the working day.In the market with high penetration of permeability renewable energy,the seasonality of electricity price volatility is no longer obvious.Further constructing the realized volatility model to identify the volatility of the electricity price.It is pointed out that the electricity price fluctuates more violently in the initial stage of power market construction,and the high penetration of intermittent renewable energy makes the price volatility of electricity more severe.Differentiating the stability of the electricity market and the volatility of electricity prices,this paper finds that the large-scale infiltration of intermittent renewable energy will make the market more stable.Then,taking the western Denmark market as the research object,by constructing multiple linear regression models to identify the factors affecting the fluctuation of electricity price,it is pointed out that demand and intermittent renewable energy generation(wind power)are the main factors affecting the volatility of electricity price.On this basis,this paper uses the qualitative analysis method to further study the financial instruments that control the fluctuation of electricity price,and analyzes the principle of controlling the volatility of electricity price by financial derivatives based on electricity-based assets and weather derivatives based on weatherbased assets.The results show that the power derivative products on the one hand enrich the investment choices of market participants,on the other hand,it is also a powerful tool for market participants to manage the risk of power price volatility.Finally,this paper proposes suggestions for China's power market reform: in the process of reform,both builders and participants should fully understand the volatility of electricity price after the emergence of competitive electricity prices,and simultaneously design related derivatives to hedge the price risk.