Beschreibung:
Motivated by the relatively infrequent but very large price spikes in the day-ahead and real-time energy markets operated by the Electric Reliability Council of Texas, this paper proposes an insurance that a retail electric provider (REP) may buy to mitigate financial insolvency caused by inadequate risk management. It demonstrates how to practically design and price the proposed insurance. As the insurance is mutually beneficial for insurance sellers and REPs based on the insurance’s voluntary transactions, it is a newly developed wholesale market product that deserves consideration by insurance sellers, REPs in Texas, and competitive retailers elsewhere