Virtual Bidding, Wind Generation and California's Day-Ahead Electricity Forward Premium

Deregulated electricity markets in the U.S. and elsewhere exhibit volatile spot market prices, chiefly because of the non-storable nature of electricity and the need to balance system demand and supply in real time. A study of California's electricity markets finds virtual bidding (VB) has reduced the volatility of the state's day-ahead hourly forward premiums, and that rising wind generation has altered the premium level and volatility. These findings suggest VB has improved market-price convergence in California's day-ahead and real-time markets, notwithstanding wind generation's effect on California's electricity market prices.