This article is the third in a multi-article series on the FEA Power Sector Model. The first
article provided an overview of the issues that must be confronted in the realistic
modeling of energy derivatives and the second article focused on the simulation of
weather-contingent hourly load, with its inherent historical bent and data calibration
issues. On the road leading to the valuation of real options associated with assets in the
deregulated energy context, we will now focus in on the simulation of the spot power
prices in the context of a hybrid model combining historical and forward looking
information on weather, load, power and fuel prices.