Valuation and Optimal Interruption for Interruptible Electricity Contracts
نویسندگان
چکیده
We consider interruptible electricity contracts issued by a distributor of electricity, that allow for interruptions to electric service in exchange for either an overall reduction in the price of electricity delivered, or for financial compensation at the time of interruption. We provide an equilibrium model to determine electricity prices, based on stochastic models of supply and demand. In the context of this model we quantify the value of interruptible contracts and describe the optimal interruption strategy. Our numerical results indicate that, in a deregulated, competitive, market, interruptible contracts can alleviate supply problems associated with spikes of price and demand.
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