Question 187.2: Financial assets are stored (please note this is different than having a storage cost) but electricity is effectively non-storable. Consider three possible implications of electricity’s non-storability:

I. The electricity forward curve performs a price discovery function (it contains unique information not already contained in the spot price of electricity)
II. Unlike the forward curve of a financial asset, we expect the electricity forward curve to contain swings
III. Unlike a financial commodity where the forward price can be expressed as a function of the expected future spot price, $F(0) = E[S(t)] \cdot \exp[(r - a)T]$ where $(r)$ is the risk-free rate and $(a)$ is the discount rate, the electricity forward price cannot be similarly expressed

According to McDonald, which of the statements is TRUE about the electricity forward curve?