Work

Research on Energy Futures Hedging Strategies for Electricity Retailers’ Risk Based on Monthly Electricity Price Forecasting

Year: 2026

Type: article

Abstract: The widespread adoption of electricity market trading platforms has enhanced the standardization and transparency of trading processes. As markets become more liberalized, regulatory policies are phasing out protective electricity pricing mechanisms, leaving retailers exposed to price volatility risks. In response, demand for risk management tools has grown significantly. Futures contracts serve as a core instrument for managing risks in the energy sector. This paper proposes a futures-based risk hedging model grounded in electricity price forecasting. A price prediction model is constructed using historical data from electricity markets and energy futures, with SHAP values used to analyze the transmission effects of energy futures prices on monthly electricity trading prices. The Monte Carlo simulation method, combined with a t-GARCH model, is applied to calculate CVaR and determine optimal portfolio weights for futures products. This approach captures the volatility clustering and fat-tailed characteristics typical of energy futures returns. To validate the model’s effectiveness, an empirical analysis is conducted using actual market data. By forecasting electricity price trends and formulating futures strategies, the study evaluates the hedging and profitability performance of futures trading under different market conditions. Results show that the proposed model effectively mitigates risks in volatile market environments.

Source: Energies

DOI: 10.3390/en19020552

Authors: Weiqing Sun, Chenxi Wu

Institution: University of Shanghai for Science and Technology

Language: English

Topic: Energy Load and Power Forecasting

Subfield: Electrical and Electronic Engineering

Field: Engineering

Domain: Physical Sciences

SDGs: Affordable and clean energy, Climate action

Open Access status: gold

Estimated APC paid: $3,137