Optimal Hedge for Nodal Price Risk using FTR

Abstract

As the deregulation of electric business proceeds, each company needs to construct a risk hedging system. So far many companies have not been taking much care of this suffciently. In this paper, we address the nodal price hedge issue. Most companies have risks for the nodal prices which tend to be highly volatile. There's almost no doubt that such a company actually needs hedge products to make profits stable. We suggest the usage of FTR for this purpose. First, we briefly note the mechanisms of nodal price in PJM market and FTR, and suggest the mathematical formulations. Then we show some numerical examples and discuss our findings.