Universität zu Köln

Brandkamp, Simon Michael ORCID: 0009-0001-2357-6040 (2025). Managing Risk in Electricity Markets. PhD thesis, Universität zu Köln.

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Abstract

This dissertation comprises four chapters that examine how short-term electricity prices and financial hedging can improve market resilience during extreme weather events. While high scarcity prices can align demand and supply, they also expose market participants to significant financial risk. Chapter 1 estimates the price elasticity of UK households on dynamic tariffs, finding an average elasticity of −0.26 and highlighting the potential for substantial demand response during extreme weather events. Chapter 2 proposes combining dynamic tariffs with forward contracts to reduce bill volatility while preserving incentives for price responsiveness. It shows that forward hedging effectively mitigates consumer risk associated with dynamic pricing. Chapter 3 analyzes optimal hedging strategies for generators and retailers in ERCOT’s day-ahead market under extreme price spikes, finding that while options are valuable in volatile markets, forward-only strategies perform nearly as well. Chapter 4 introduces a novel forward market design that enables granular, continuous trading of derivatives, illustrating how trading behavior and arbitrage depend on agents’ risk preferences and the frequency of price spikes. Collectively, the chapters demonstrate that dynamic pricing, supported by well-designed hedging instruments and forward markets, can significantly strengthen electricity market resilience during extreme weather.

Item Type:	Thesis (PhD thesis)
Creators:	Creators Email ORCID ORCID Put Code Brandkamp, Simon Michael simon_brandkamp@web.de https://orcid.org/0009-0001-2357-6040 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-780980
Date:	2025
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Center of Excellence C-SEB
Subjects:	Economics Management and auxiliary services
Uncontrolled Keywords:	Keywords Language Electricity market design, dynamic prices, price elasticity, demand response, scarcity prices, forward hedging English
Date of oral exam:	7 April 2025
Referee:	Name Academic Title Ockenfels, Axel Prof. Dr. Cramton, Peter Prof. Ruhnau, Oliver Jun.-Prof. Dr.
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/78098