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E4C/GSF Seminar

9 février 2022 @ 10h00 - 11h30

E4CGSF seminar

« Pitfalls of Insuring Production Risk: a Case Study on some Wind Power Auctions in France »

Clément Leblanc, Laurent Lamy (CIRED)

Résumé : We consider auctions for procurement contracts involving exogenous production risk and whose payment rule depends not only on realized production but also on self-reported expected production. We first establish a conflict between insurance provision and strategy-proofness. We then analyze equilibrium bidding behavior under several paradigms regarding bidders’ ability to misreport their expected production and illustrate our results on the pitfalls of production-insuring payment rules through simulations calibrated for some offshore wind power auctions in France.
We estimate that a single strategic bidder could capture a rent that is more than 10 times larger than the potential benefits from reduced risk premiums under truthful reporting.
Lastly, we introduce variants of the French rule, in particular with punishments aimed to discourage misreporting, and find limited room for improving unit-price contracts.

« Green investment and asset stranding under transition scenario uncertainty »
Maria Flora and Peter Tankov (CREST)
We develop a real-options approach to evaluate energy assets and potential investment projects under transition scenario uncertainty. Dynamic scenario uncertainty is modeled by assuming that the economic agent acquires the information about the scenario progressively by observing a signal. The problem of valuing an investment is formulated as an American option pricing problem, where the optimal exercise time corresponds to the time of entering into a potential investment project or the time of selling a potentially stranded asset. We illustrate our approach by applying representative scenarios from the NGFS scenario database to the examples of a coal-fired power plant without Carbon Capture and Storage (CCS) and a potential investment into a biomass power plant with CCS.


Date :
9 février 2022
Heure :
10h00 - 11h30
Catégorie d’Évènement:
Site :


Emmanuel Gobet, Philippe Quirion, Peter Tankov


Institut Louis Bachelier
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