A Comment on: Storage and the Electricity Forward Premium

16 Pages Posted: 28 Jul 2009

See all articles by Adriaan Bloys van Treslong

Adriaan Bloys van Treslong

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Ronald Huisman

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: July 2009

Abstract

This paper examines the robustness of the results found by Douglas and Popova (2008). They examine the electricity forward premium in relation to gas storage inventories and find that, although electricity is not directly storable, electricity forward premiums are lower when gas storage inventories are higher, especially on days with high temperatures. Douglas and Popova (2008) derive their results from a forward premium model that is an extension of the Bessembinder and Lemmon (2002) model. We examine the robustness of their results, by examining whether the gas storage inventory results hold under a different specification of the forward risk premium. Our result support the results found by Douglas and Popova (2008) and show that their results are not influenced by the specification of the forward premium model.

Keywords: forward premium, electricity

JEL Classification: G3, M

Suggested Citation

Bloys van Treslong, Adriaan and Huisman, Ronald, A Comment on: Storage and the Electricity Forward Premium (July 2009). ERIM Report Series Reference No. ERS-2009-042-F&A, Available at SSRN: https://ssrn.com/abstract=1437868

Adriaan Bloys van Treslong

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Ronald Huisman

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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