*5.3.2. Sensitivity to transaction costs* 25% % of maximal energy

52.57 \$/MWh

48.68 \$/MWh

\$/MWh

42.25 \$/MWh

50%

75%

100%

buying replacement power in the spot market.

The third case of study is identical to the base case but considering a transaction cost of 7% of the sold amount instead of 3%. The optimal trading policy for the case of increased transaction costs are shown in Figure 11. In this case, the generator sells only 1.32% of its capacity in an annual future contract due to the irreversibility introduced by the higher transactions costs and the larger contracting volume. Under these circumstances, the risk premium offered in the annual future price render insufficient for attracting the generator to enter in such a longlasting commitment. On the other hand, the sell volume in quarterly futures is higher than in the base case, staying between 62% and 76% in a rather static trading policy. Under higher transaction fees, it is desirable to be able to rebalance the portfolio in future stages with smaller changes and hence smaller transaction costs. Expectedly, the expected profit is lower due to higher costs. The delivery risk for the first month is negligible, due to the fact that the most likely failures can still be covered by the remaining operative units without buying replace‐ ment power in the spot market. Figure 10. Optimal trading strategy for a 5x2MW generation portfolio with reduced availability **5.3.2. Sensitivity to transaction costs**  The third case of study is identical to the base case but considering a transaction cost of 7% of the sold amount instead of 3%. The optimal trading policy for the case of increased transaction costs are shown in Figure 11. In this case, the generator sells only 1.32% of its capacity in an annual future contract due to the irreversibility introduced by the higher transactions costs and the larger contracting volume. Under these circumstances, the risk premium offered in the annual future price render insufficient for attracting the generator to enter in such a long-lasting commitment. On the other hand, the sell volume in quarterly futures is higher than in the base case, staying between 62% and 76% in a rather static trading policy. Under higher transaction fees, it is desirable to be able to rebalance the portfolio in future stages with smaller changes and hence smaller transaction costs. Expectedly, the expected profit is lower due to higher costs. The delivery risk for the first month is negligible, due to 0% 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

48.15 \$/MWh

the fact that the most likely failures can still be covered by the remaining operative units without

Figure 11. Optimal trading strategy for a 5x2MW generation portfolio with higher transaction costs

**Figure 11.** Optimal trading strategy for a 5x2MW generation portfolio with higher transaction costs
