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Conference Paper: Financing long-term generation capacity in a reference price oriented capacity market

TitleFinancing long-term generation capacity in a reference price oriented capacity market
Authors
KeywordsBlack-scholes
Capacity markets
Capacity value
Contingent claims
Electricity prices
Issue Date2010
PublisherIEEE, Computer Society. The Journal's web site is located at http://csdl2.computer.org/persagen/DLPublication.jsp?pubtype=p&acronym=HICSS
Citation
The 43rd Hawaii International Conference on System Sciences (HICSS 2010), Honolulu, HI., 5-8 January 2010. In Proceedings of the Annual Hawaii International Conference on System Sciences, 2010, p. 1-7 How to Cite?
AbstractMany power markets around the world have been facing inadequacy with generation capacity investment to meet the growing demand. Among various frameworks directed towards this problem, capacity markets have emerged in major eastern US power markets. In this paper, a prototype capacity market is discussed which is consistent with the trend of convergence of market design. Based on this, the critical role of the reference capacity price is brought up, followed by a detailed explanation of its economic rationale and concerns. Noted with the necessity of a systematic pricing scheme to determine the value of the reference capacity price, a pricing model based on the general Black-Scholes contingent claim framework is proposed. In this model, the capacity value is treated as a path-dependent derivative with electricity prices and natural gas prices as underlyings. Numerical study is conducted to prove model validity with a lattice approach adopted. © 2010 IEEE.
Persistent Identifierhttp://hdl.handle.net/10722/126199
ISSN
References

 

DC FieldValueLanguage
dc.contributor.authorSun, Yen_HK
dc.contributor.authorWu, FFen_HK
dc.contributor.authorHou, Yen_HK
dc.date.accessioned2010-10-31T12:15:10Z-
dc.date.available2010-10-31T12:15:10Z-
dc.date.issued2010en_HK
dc.identifier.citationThe 43rd Hawaii International Conference on System Sciences (HICSS 2010), Honolulu, HI., 5-8 January 2010. In Proceedings of the Annual Hawaii International Conference on System Sciences, 2010, p. 1-7en_HK
dc.identifier.issn1530-1605en_HK
dc.identifier.urihttp://hdl.handle.net/10722/126199-
dc.description.abstractMany power markets around the world have been facing inadequacy with generation capacity investment to meet the growing demand. Among various frameworks directed towards this problem, capacity markets have emerged in major eastern US power markets. In this paper, a prototype capacity market is discussed which is consistent with the trend of convergence of market design. Based on this, the critical role of the reference capacity price is brought up, followed by a detailed explanation of its economic rationale and concerns. Noted with the necessity of a systematic pricing scheme to determine the value of the reference capacity price, a pricing model based on the general Black-Scholes contingent claim framework is proposed. In this model, the capacity value is treated as a path-dependent derivative with electricity prices and natural gas prices as underlyings. Numerical study is conducted to prove model validity with a lattice approach adopted. © 2010 IEEE.en_HK
dc.languageengen_HK
dc.publisherIEEE, Computer Society. The Journal's web site is located at http://csdl2.computer.org/persagen/DLPublication.jsp?pubtype=p&acronym=HICSS-
dc.relation.ispartofProceedings of the Annual Hawaii International Conference on System Sciencesen_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsAnnual Hawaii International Conference on System Sciences Proceedings. Copyright © IEEE, Computer Society.-
dc.rights©2010 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE.-
dc.subjectBlack-scholes-
dc.subjectCapacity markets-
dc.subjectCapacity value-
dc.subjectContingent claims-
dc.subjectElectricity prices-
dc.titleFinancing long-term generation capacity in a reference price oriented capacity marketen_HK
dc.typeConference_Paperen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1060-3425&volume=&spage=1&epage=7&date=2010&atitle=Financing+long-term+generation+capacity+in+a+reference+price+oriented+capacity+market-
dc.identifier.emailWu, FF: ffwu@eee.hku.hken_HK
dc.identifier.emailHou, Y: yhhou@hku.hken_HK
dc.identifier.authorityWu, FF=rp00194en_HK
dc.identifier.authorityHou, Y=rp00069en_HK
dc.description.naturepublished_or_final_version-
dc.identifier.doi10.1109/HICSS.2010.209en_HK
dc.identifier.scopuseid_2-s2.0-77951739555en_HK
dc.identifier.hkuros172196en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-77951739555&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.spage1-
dc.identifier.epage7-
dc.description.otherThe 43rd Hawaii International Conference on System Sciences (HICSS 2010), Honolulu, HI., 5-8 January 2010. In Proceedings of the Annual Hawaii International Conference on System Sciences, 2010, p. 1-7-
dc.identifier.scopusauthoridSun, Y=7408368031en_HK
dc.identifier.scopusauthoridWu, FF=7403465107en_HK
dc.identifier.scopusauthoridHou, Y=7402198555en_HK

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