How to get maximum value from power plant hedging

The primary source of financial uncertainty over the revenues of fuel-fired power plants is the volatility of prices in power, fuel and emissions allowances. Traditionally, power plant operators have reduced the uncertainty of their revenues by entering into long-term agreements on power, fuel and, more recently, emissions allowances. This static strategy is not the only possibility operators face; since liquidity in wholesale markets has increased, dynamic hedging is becoming common practice.

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