Investing in Bridging Fuels: The Unit Commitment Problem of Public vs. Private Ventures

Natural gas is widely considered as the bridging fuel that is leading the way throughout the period of the energy transition. From the perspective of the Greek electricity market, this paper investigates the unit commitment problem that electricity producers, using natural gas as their main fuel, face in their core business activity. By utilizing hourly observations for the period 2015-2019, we implemented the well-known RAROC methodology for both public and private electricity producers. Our analysis demonstrates a novel approach that reveals the outcome of cash flows at risk and imbalance charges, by measuring in detail the efficiency among producers. The empirical findings reveal that public units are significantly more efficient compared to private units. Those findings could be translated as a huge impact on firms’ average cash flows affecting their profitability and in parallel, revealing margins for operational maximization that would eventually lead to an increase in social welfare, as well.