Electricity

Objectives

The programmes “Power, Power Markets & Trading” are specifically designed to expand students’ knowledge of, and skills with respect to electricity. The programmes cover electricity production, electricity transmission & infrastructure, electricity delivery & consumption, organisation of the European power markets, the role of market participants, regulation of the European electricity markets, the role of governments, tariff setting & taxation, power-related products & their pricing, trading of power, power derivatives, power trading platforms, power asset & portfolio management, asset-backed trading, optimisation of power plants, power trading strategies, and trading-related processes, such as settlement, invoicing, valuation of gas positions & finance.

Course Contents

Power forward market

• Convering the differences between spot & forward markets.
• About price volatility in spot & forward markets; mean reversion.

Power exchanges & brokers

• About OTC markets and trading venues for power.
• Concerning market liquidity, notional value and open interest.

Power forwards & futures – The varieties

• Concerning the most commonly known contracts.
• The time-to-maturity and delivery moment/period.

Power forwards & futures – The application

• Covering asset-backed trading as well as proprietary trading.
• About managing power-related exposures.

Power forwards curves – Pricing of power forwards & futures

• About contango & backwardation, including seasonality.
• Covering the convenience yield.

Hedging power production & consumption capacity

• About procurement & sales on a forward basis; contract management.
• Covering assuring future cash flows by price fixation.

Hedging power transmission capacity

• Locking in potential margins on a forward basis.
• Covering location spreads; what these are & how to trade these.

Settlement of power forwards & futures – Part 1

• Including physical delivery & cash settlement.
• Covering nomination & periodic invoicing.

Settlement of power forwards & futures – Part 2

• Concerning the process of cascading.
• Covering the consequences of it for the power portfolio.

Exam & Certification

Objectives

The programmes “Power, Power Markets & Trading” are specifically designed to expand students’ knowledge of, and skills with respect to electricity. The programmes cover electricity production, electricity transmission & infrastructure, electricity delivery & consumption, organisation of the European power markets, the role of market participants, regulation of the European electricity markets, the role of governments, tariff setting & taxation, power-related products & their pricing, trading of power, power derivatives, power trading platforms, power asset & portfolio management, asset-backed trading, optimisation of power plants, power trading strategies, and trading-related processes, such as settlement, invoicing, valuation of gas positions & finance.

Course Contents

Accounting – Book structure & internal transfers

• About internal transactions & prices, including premiums.
• Concerning book structures, cost allocation & P/L responsibility.
• Covering upstream, midstream & downstream activities.

Customer portfolio

• About power supply contracts; including load forecast.
• Concerning circumstances, e.g. weather, economic situation.

Physical power assets

• About make-or-buy decisions & asset-backed trading.
• Aggregation of rights & obligations (prod., cons. & settlement).

Power swaps – Physical settlement

• Concerning solutions for problem solving in the physical world.
• About basis swaps, or location swaps.

Power swaps – Cash settlement

• About financially-settled agreements, including indexation.
• Concerning fixed-for floating contracts.

Power options – Outright options

• About tradable contracts in the OTC markets & on exchange.
• Pricing of power options; intrinsic value plus time value.

Power options – Application for hedging purposes

• About hedging natural short/long positions with call/put options.
• About power price caps & floors.

Power options – Embedded optionality

• About volume flexibility & swing optionality in supply contracts.
• Covering structuring and structured deals.

Exam & Certification

Objectives

The programmes “Power, Power Markets & Trading” are specifically designed to expand students’ knowledge of, and skills with respect to electricity. The programmes cover electricity production, electricity transmission & infrastructure, electricity delivery & consumption, organisation of the European power markets, the role of market participants, regulation of the European electricity markets, the role of governments, tariff setting & taxation, power-related products & their pricing, trading of power, power derivatives, power trading platforms, power asset & portfolio management, asset-backed trading, optimisation of power plants, power trading strategies, and trading-related processes, such as settlement, invoicing, valuation of gas positions & finance.

Course Contents

Power risk management – Value-at-risk of a power position

• About the a commonly applied method to quantify an exposure.
• Covering the relevant time horizon and confidence level.

Power risk management – Risk off-set due to correlation

• About statistical data and concepts, and how to apply these.
• Concerning pairs or proxies.

Power risk management – Value-at-risk of a power portfolio

• About the quantification of aggregated power positions.
• Considering opposing long/short positions & correlated positions.

Power risk management – Off-setting risk (opposing exposures)

• About risk off-setting and netting.
• Covering portfolio integration and cross-margining.

Modelling – The real option approach

• About production capacity & transmission capacity.
• About management decisions, such as the right to dispatch.

Modelling – Physical power assets as real options

• Considering power generation cap. & power transmission cables.
• About call options on the spark/dark spread or location spread.

Modelling – Complexity: Valuation & hedging of spread options

• About structuring, including exotic options.
• Including spread option valuation models, e.g. Margrabe.

Modelling – Optimizing the hedges

• About hedging strategies, e.g. proxy-hedging.
• Concerning dynamic risk management; Delta-hedging.

Modelling – Weather elements (precipitation & wind data)

• About the impact of renewables on the power markets.
• Hydro: Precipitation, cascading, pump storage.
• Wind: Concerning temperature, location, direction, wind roses, diurnal cycle, pressure gradient force, coriolis force, friction.

Exam & Certification