The Effect of Inventory Strategies with Hedging on Electricity Market

This paper studies the real electricity market management based on inventory strategies with futures exchange hedging, including hedging techniques, prices and supplies fluctuation. Generally, an electricity market is marked off annual contract market, monthly contract market, day-ahead market and spot market. The different markets have different price fluctuation and changing properties of supply and demand. In this paper, annual contract market, monthly contract market and day-ahead market are attributed to futures market. The paper illustrates the properties of both spot price and futures contract price, and shows different market risks from spot market and futures market. Especially, the market risk from spot market is random, and that from futures market is Nash type. These mean that different policies should be adopted to control the market risks respectively from spot market and futures market.