Insuring the penalty risk of non-delivery in the United Kingdom's capacity market

C. K. Woo, K. H. Cao*, A. Tishler

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    Abstract

    In July 2021, the United Kingdom (UK) Government considered tripling the UK grid's performance-based incentive scheme's penalty for capacity non-delivery during a shortage. This paper proposes an insurance that a generator may buy to manage its risk exposure to the scheme's penalty. It also shows how to use readily available data to calculate the insurance's per MW premium. These findings suggest that the proposed insurance deserves consideration by generators and insurance sellers.

    Original languageEnglish
    Article number107157
    JournalElectricity Journal
    Volume35
    Issue number7
    DOIs
    Publication statusPublished - Aug 2022

    Scopus Subject Areas

    • Business and International Management
    • Energy (miscellaneous)
    • Management of Technology and Innovation

    User-Defined Keywords

    • Capacity non-delivery
    • Electricity grid
    • Incentive scheme
    • Penalty risk
    • United Kingdom

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