The asset light retailing model’s curse [in French]

Summary: The failure of pure electricity suppliers is indicative of the incapacity of their organizational model to manage efficiently the combination of sourcing and market risks in a setting of fierce price competition. Because of the structural dimension of electricity’s volume risk, a supplier’s level of risk exposure is unknown ex ante and will only be revealed ex post when consumption is known. Sourcing and selling portfolios of hedging contracts are incomplete risk management tools. Consequently, physical hedging is an essential complement to portfolios of contracts to overcome the pure supplier’s curse.