An electricity price area is a zone throughout which the electricity is traded at the ''same''

spot Spot or SPOT may refer to: Places * Spot, North Carolina, a community in the United States * The Spot, New South Wales, a locality in Sydney, Australia * South Pole Traverse, sometimes called the South Pole Overland Traverse People * Spot (prod ...

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

on a power exchange. An electricity price area is decided by

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and can be a whole country, or parts of it.

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 A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoin ...

against this

market risk Market risk is the risk of losses in positions arising from movements in market variables like prices and volatility. There is no unique classification as each classification may refer to different aspects of market risk. Nevertheless, the most ...

called area price risk.

References

Electricity markets Financial risk {{finance-stub

EPADs and price area risk

See also

References