Financial Wind CfDs

Arbeitspapier

Contracts for differences are widely discussed as a cornerstone of Europe’s future electricity market design. In this paper, we make three contributions to the debate. First, we summarize the dispatch and investment distortions that traditional CfDs cause. Second, we propose an alternative CfD specification that we dub "financial wind CfDs". It is a hybrid between CfDs and forward contracts that aims at being superior to conventional CfDs both in terms of risk mitigation and incentives. Third, we point out that "the other side of the contract", the government’s financial position resulting from any long-term contract with generators, must be carefully handled to avoid muting consumers' flexibility incentives or depleting forward markets.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: doi:10.1016/j.enpol.2024.113981

Classification and Topics

• Classification: Wirtschaft ; Alternative Energy Sources
• Subject: electricity market ; market design ; contracts for differences ; energy economics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schlecht, Ingmar ; Hirth, Lion ; Maurer, Christoph
• Event: Veröffentlichung
• (who): ZBW – Leibniz Information Centre for Economics
• (where): Kiel, Hamburg
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/267597
• Last update: 10.03.2025, 11:41 AM CET