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Valuing interruptus

Managing wholesale spot power price volatility by turning off supply offers a way of reducing price spikes, but measuring the value of such interruptibility involves costly modelling techniques. JK Winsen suggests a simpler alternative

    • JK Winsen
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Electricity retailers (load serving entities) regularly use hedging in wholesale energy markets to manage the risk of wholesale spot price volatility. But inevitably some spot exposure remains, especially during peak load periods when generating plant failures and/or extreme weather can lead to price spikes. Demand-side management designed to shave peak loads offers some hope of ameliorating such price spikes.

One form of demand-side response, which has existed for some time, takes the form

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