Renewable forward contracts in electricity auctions lead to higher spot prices.
The study tested how holding forward contracts affects electricity auction prices. They used students and computer agents to simulate suppliers in different contract scenarios. Results showed that fixed forward contracts can help control high prices, while renewable contracts lead to more speculation and higher spot prices. Long-term contracts reduce speculation, but this effect weakens in active markets. Computer agents generally earned more than students, with some agents being more likely to speculate. Overall, renewable contracts can increase earnings but also raise spot prices.