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Article on the paradox of scarcity pricing

See here for an article on the EurActiv web site on scarcity pricing. The article examines the paradox which sees that on the one hand, one of the “selling points” which make investment in intermittent renewables attractive is that returns can be achieved during a scarcity pricing period. On the other hand, price spikes in wholesale power are seen by some as “bad” for the consumer leading to overpricing.

The fine line between manipulation and reacting to market events is one of the issues raised of Ofgem in their open letter on scarcity pricing issued last December(see here). In that letter, Ofgem reminded the market that to create a scarcity situation could be considered a manipulation, whereas reacting to one is “normal” market behavior.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on energy and commodity regulation. He has more than 20 years of experience in energy and commodity trading, credit, risk and financial technology. He has delivered a series of trading, credit and risk solutions to a wide variety of oil majors, power and gas companies and investment banks. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


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