Electricity price area
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(Redirected from Price area risk)
File:Hou710 ElectricityPriceArea.svg
As an example, the map shows the situation in the Nordic region as of winter 2015. Norway has currently five electricity price areas, Sweden is subdivided into four (Malmö, Stockholm, Luleå and Sundsvall), Denmark is split into Eastern and Western Denmark, while Finland, Estonia, Lithuania and Latvia remain unsplit.
An electricity price area is a zone throughout which the electricity is traded at the same spot price on a power exchange. An electricity price area are decided by transmission system operator and can be a whole country, or parts of it.[1]
EPADs and Price Area Risk
The electricity price usually differs from the system price from one price area to another, e.g. when there are constraints in the transmission grid. A special contract for difference called Electricity Price Area Differentials or EPAD allows members on the power exchange to hedge against this market risk called area price risk.[2]
See also
References
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