Electricity Market, Energy Economics and Strategic Planning Course

Course Overview:

This course enhances comprehension on the intricacies surrounding the design, planning, and execution of electricity power markets. 

In the space, participants will delve into risk management practices, microeconomics of the market, and financial derivatives such as options and future contracts. 

The course encompasses regulatory frameworks, strategic risk headaches, and quantitative risk models accompanied by real-time case studies and practical examples, including weather derivatives. 

The course is ideal for engineers, managers, and planners working in the energy industry by providing the needed tools to handle market fluctuations, optimize trading strategies, and mitigate operational and financial risks.

Course Objectives:

This program is intended to immerse the participants in learning about Electricity Power Markets: How they can be developed, planned, and implemented. By the end of the training, participants will be able to:

• Understanding the Planning and Operating Process
• Understanding the Financial and Economic issues
• Ability to deal with the risks associated with Market Uncertainties.

Who Should Attend?

This course is intended for Practitioners Trading Power, Power System Engineers, Managers, Engineers, and Planners related to Energy and Power Market.

Course Outlines:

Risk Management

• Sustainability; the capacity for continuity into the long term future
• Risk Framework/Metrics
• Examples of Regulatory Risks
• Types of Instruments
• Futures (NYMEX, Amsterdam Exchange)
• Strategies: Vanilla and Exotic Options
• Design of Contracts (ISDA, EEI, OTC, NYMEX)
• Typical Trades - Futures, SWAPS, OPTIONS
• Choice of Hedges
• Real-life Examples
• Types of Trades - Useful to the Producer
• Types of Trades - Useful to the Load
• Advantage/Disadvantage of different Tools

Lessons Learned from other Jurisdictions

• North America Market (FERC)
• FERC white paper on Transmission Policy
• Challenges of Scale, Scope, and Timing

Elements of Risks (Strategic Issues)

• Basel Committee for Banking Supervision
• Market Locational Risk
• Operational Risk
• Credit Risk/ Liquidity Risk
• Physical Risk of Generating Assets
• Legal and Regulatory Risks
• Trading Controls and Best Practices
• Independent Risk Management
• Front to Back Office Case Studies:
• Enron’s Price Maximization
• Quantitative / Qualitative Risks

Concepts of Derivatives Part I

• Forward Contracts: Contango, Backwardation
• Futures Contracts
• Contract Standardization
• Energy Futures contracts
• Arbitrage Pricing Theory
• Convenience Yield
• Swaps

Concepts of Derivatives Part II

• Option Contracts
• Strategies Involving Options
• Basic Options Strategies
• Call-Put Parity
• Daily Options, Monthly, Spreads
• Spark Options on 2 Commodities
• Spark Options on 3 Commodities
• Volumetric or Swing Options
• Real Options: Power and Physical Constraints

Option Valuation

• Valuation of Option Strategies
• Closed-Form Solutions (Black Scholes)
• The Binomial Tree Approach
• Monte Carlo Valuation of Options
• Examples of Hedging

Quantitative Financial Models

• Quantitative Financial Models
• Stochastic Factors: Production and Demand
• Mean Reversion Model, Jumps

Market Economics

• Day-Ahead Market
• Unconstrained Price
• Constrained Price
• Bidding Strategy
• Locational Marginal Price
• Energy Price Cap

Portfolio Analysis

• Demand & Supply
• Demand & Supply Equilibrium Price
• Value AT Risk
• Strategic Planning
• Multiyear Plan
• Multi-Area Forecasting
• Budget
• Forward Prices

Financial Transmission Rights

• Transmission Pricing
• Congestion Management
• Auction

CASE STUDY: Weather Derivatives

• Weather Risk
• Description of Weather Contracts
• Weather Risk Management Instruments

Market Economics (Best Practices)