Implementing Contract-for-Difference Arrangements for Hedging Electricity Price Risks of Renewable Generators on a Blockchain Marketplace

【Author】 Alao, Olakunle; Cuffe, Paul

【Source】IEEE TRANSACTIONS ON INDUSTRIAL INFORMATICS

【影响因子】11.648

【Abstract】The dynamic nature of competitive electricity markets means that participants often resort to some form of derivative financial instrument. One such instrument is a contract-for-difference (CFD), usually available to renewable generators in certain electricity markets to enable them to hedge their price risk. Embracing CFD presents new risks such as counterparty credit, margining, third-party, legal, and process risks. Derivative instruments existing on blockchains have recently demonstrated potential as suitable hedging tools for minimizing the risks of renewable generators. This article applies this concept for the first time to hedge the price risk of renewable generators by implementing a novel decentralized finance instrument, an Ethereum blockchain marketplace governed by a smart contract to mediate between stakeholders mutually enrolled in bilateral CFD arrangements. The employed structure mitigates the underlying risks of traditional arrangements, underpinned by a suite of autonomous mechanisms.

【Keywords】Smart contracts; Generators; Instruments; Blockchains; Renewable energy sources; Electricity supply industry; Security; Blockchain; contract-for-difference; electricity market; renewable electricity; smart contract

【发表时间】2023 APR

【收录时间】2023-08-01

【文献类型】理论模型

【主题类别】

区块链应用-实体经济-电力领域