Course dates
People coming to electricity markets for the first time are taken aback by the extreme market conditions that are
commonplace in this most challenging of trading environments. Levels of volatility are unprecedented: and modelling price-formation is unusually complex. This course shows delegates how to approach electricity markets from the fundamental aspects of their power generating fleets, cost-base profiles and market structures. It signposts the radical changes that electricity markets are undergoing as governments impose demanding ‘decarbonisation’ targets, and highlights the risk-management implications.
Featuring:
- How and why electricity is fundamentally different
- What this means for trading and market structures
- Analysing and modelling electricity price-formation
- Ongoing impact of CO2 trading and decarbonisation
- Risk management for generators, utilities and buyers
- Case studies and worked examples
Course overview
A comprehensive and systematic introduction to traded electricity markets. The course will detail why and how electricity – the most challenging of all commodities – presents complexities more acute than in other traded market sectors, and how to understand, model and manage these demanding conditions.
Case studies will illustrate how companies have resolved these issues, including Centrica, one of very few companies to have made a successful entry into this most difficult of markets.
Benefits of attending
- Learn how electricity markets differ significantly from other traded commodities – and how this creates greater risks
- Navigate the complexities of different market models and structures
- Discover how price-formation develops in ultra-volatile electricity markets – and how to model it
- Gain key insights into future market developments in this fast changing arena – and managing the risks involved
Day 1
The fundamentals of electricity markets
- The electricity value-chain and its significance
- Generation cost-structures for different technologies
- Merit order and the ‘generation stack’
- Load-duration curves
Commerce in electricity
- Why electricity is different from other commodities
- Traditional solutions and transactional forms
- Monopolies and the Vertical Integration model
- Pools and the Single Buyer concept
- Exchanges and auctions
- Bilateral transactions and continuous trade
- Spot markets and forward markets
- Liquidity and illiquidity in transitional markets
Case Study: Centrica
The case of Centrica vividly illustrates several key principles covered in the first two sessions. From its origins as a traditional monopoly gas company, Centrica attempted to build a new business model based on two radical innovations: to move into retail electricity, and to operate a ‘merchant’ business across several countries. The case study will look at how, uniquely for a player from
the oil & gas sector, it succeeded in the first objective: but was forced to retreat from the second as market conditions evolved.
Special features of electricity trading
- Balancing mechanisms and imbalance charges
- Capacity markets
- The impact of the ‘fleet’ on a market
- Storage, lack of storage and hydro-electricity
- Spread trading: ‘spark’ & ‘dark’ spreads; time-spreads
- Virtual’ power plants, as product and analytic tool
Exercise: synthetically replicating a thermal power plant (1)
- using tolling agreements, derivatives & spreads
Day 2
Exercise: synthetically replicating a thermal power plant (2)
- recap of Day 1’s exercise
- identifying practical differences between analytically identical alternatives
- further exercise on synthetic replication
From cost to price: price formation in electricity
- Baseload, peak and super peak
- Drivers of electricity price
- Price-setting in power markets
- Volatility & the challenge of modelling spot electricity prices
- Why we need ‘jumps’ in a power price model
Risk management and electricity markets
- Risk management for generators
- Risk management for utilities
- Risk management for industrial buyers of electricity
Exercise: optimising a thermal power plant through active trading in spot and forward markets
Case Study: Enron
How Enron pioneered the ‘merchant model’ and advanced risk management in electricity trading: and the lessons of Enron’s downfall
Exercise: optimising a thermal power plant through active trading in spot and forward markets
Current and future challenges for electricity trading
- De-carbonisation’ and its impact on trade
- Demand for electricity: falling today - soaring tomorrow?
- Emissions and the CO2 market
- Carbon capture and storage
- Wind-power and the challenge of intermittency
- The game-changing role of shale gas in energy market dynamics
Singapore Hotel, Singapore, Singapore
This programme takes place on a non-residential basis at a central Singapore hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Nick Perry
Nick Perry has worked exclusively in the oil, gas and power markets since the earliest days of market liberalisation, in the UK, Europe, the USA and Russia. He specialises in risk management, complex deal origination and portfolio structuring.
After serving as a Board Director of Enron Europe, in 1997 he was a founder-shareholder and Senior VP of Caminus Corp, a provider of risk management consulting and software that floated on the NASDAQ in 2000. Since leaving Caminus two years later he has consulted widely on risk and structuring for energy companies, large energy buyers, governments and regulators.
He has written and spoken widely on energy topics, and in 2001 was jointly awarded Energy Risk Magazine’s Innovation award for his work on complex gas options.
In 2005 he conducted an inquiry for the UK Department of Trade and Industry into the extreme price movements in the UK gas and electricity forward markets: his Report is a standard text in regulatory agencies and widely quoted in academic studies.
Courses run by this instructor
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
10-13 Jul 2012 (London, UK)
This intensive four-day course will shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques.
Each session focuses on a particular aspect of modelling and applies it to the case model.
18-22 Jun 2012 (London, UK)
17-21 Dec 2012 (London, UK)
This course will provide you with a general background on economic and financial issues in the context of renewable energy investments. As cost of capital is one of the most important elements in renewable project costs, the course will demonstrate how various transaction structures affect debt and equity costs. After completing the course, participants should understand project finance terminology; the economic and financial theory that underlies different transaction structures; the motives of different parties in a transaction; and, the importance of various financial and contract provisions.
11-14 Sep 2012 (Singapore, Singapore)
15-18 Jan 2013 (Singapore, Singapore)
This intensive four-day Financial Modelling in Excel for the Power Sector course will shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques. Each session focuses on a particular aspect of modelling and applies it to the case model.
24-26 Sep 2012 (Hong Kong, Hong Kong)
This Fundamentals of Developing an Independent Power Project course will provide you with a greater understanding of: 1. The necessary conditions (legal, regulatory, market/commercial, technical, financial) for the successful development of IPPs including renewable energy projects; 2. The risk management tools and
techniques available to maximise value and to understand, calculate and manage risk in IPPs including
renewable energy projects; 3. The requirements of lenders necessary to be met to secure project financing for IPPs including renewable energy projects.
18-19 Jun 2012 (London, UK)
After a gap of 15-20 years and with the need to observe Climate Change requirements, nuclear power is now back on the agenda for many governments. The challenges, however, are daunting. Nuclear power is expensive, the funding needs huge, and nuclear projects take years to implement. Finance, therefore, will be a key issue and on the critical path for many projects. This course addresses the issues and provides a detailed understanding as to the financial difficulties the sector will face.
22-25 May 2012 (New York, United States)
This intensive four-day will shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques. Each session focuses on a particular aspect of modelling and applies it to the case model.
29-31 May 2012 (Paris, France)
19-21 Nov 2012 (Paris, France)
This intensive three day hands-on course will provide a
comprehensive analysis of issues associated with independent electric power projects ranging from economic analysis of PPA contracts to financial modelling of projects. In working through analysis of projects, a mixture of case studies, lectures and analytical exercise will be used to evaluate electricity price forecasts, debt structuring, technology choice, cost of capital, and architecture of financial models.
12-15 Nov 2012 (Singapore, Singapore)
The Energy Risk Management: Mastering Volatile and Complex Markets course is a comprehensive and systematic introduction to risk management for complex energy markets. The course will detail why and how risks in energy – particularly gas and electricity - are more acute than in other traded market sectors, and how classic risk management techniques must be adapted and extended to meet these demanding conditions.
16-19 Jul 2012 (London, UK)
People coming to energy risk management for the first time are taken aback by the extreme market conditions that are commonplace in the complex markets of oil, coal, and above all, gas and electricity. Levels of volatility and basis risk are unprecedented: and there are additional risks that are unique to energy. This course shows delegates how to deploy traditional risk management tools in the challenging context of volatile energy markets, and to extend these techniques to master the unique risk characteristics of gas and electricity.
25-26 Jun 2012 (London, UK)
10-11 Dec 2012 (London, UK)
This Traded Electricity Markets course is a comprehensive and systematic introduction to traded electricity markets. The course will detail why and how electricity – the most challenging of all commodities – presents complexities more acute than in other traded market sectors, and how to understand, model and manage these demanding conditions.
21-24 Aug 2012 (Lagos, Nigeria)
Many business models fail due to poor planning,
haphazard development, inherent errors and lack
the ability to provide clear financial analysis. This course shows delegates how to build a power model from a skeleton model incorporating a range of Excel and applied financial techniques.
22-25 Oct 2012 (Paris, France)
Electricity Economics and Financial Analysis is a four day intensive, technical hands-on course in which attendees receive comprehensive instruction on the theory and practice of making price forecasts and assessing risk in the electricity generating industry.
16-18 Jul 2012 (Singapore, Singapore)
This intensive three day hands-on course will provide a
comprehensive analysis of issues associated with independent electric power projects ranging from economic analysis of PPA contracts to financial modelling of projects. In working through analysis of projects, a mixture of case studies, lectures and analytical exercise will be used to evaluate electricity price forecasts, debt structuring, technology choice, cost of capital, and architecture of financial models.
27-31 Aug 2012 (New York, United States)
This course will provide you with a general background on economic and financial issues in the context of renewable energy investments. As cost of capital is one of the most important elements in renewable project costs, the course will demonstrate how various transaction structures affect debt and equity costs. After completing the course, participants should understand project finance terminology; the economic and financial theory that underlies different transaction structures; the motives of different parties in a transaction; and, the importance of various financial and contract provisions.
12-16 Nov 2012 (Singapore, Singapore)
This course will provide you with a general background on economic and financial issues in the context of renewable energy investments. As cost of capital is one of the most important elements in renewable project costs, the course will demonstrate how various transaction structures affect debt and equity costs. After completing the course, participants should understand project finance terminology; the economic and financial theory that underlies different transaction structures; the motives of different parties in a transaction; and, the importance of various financial and contract provisions.
23-25 Jul 2012 (Paris, France)
30 Jul 2012 - 3 Aug 2012 (Accra, Ghana)
This Financing Independent Power Projects (IPPs) and Power Stations course on IPP project finance best practice is a useful tool for lenders and borrowers alike. The course director will walk candidates through the best practices of IPP project finance and at the end of the course candidates will be better prepared to successfully navigate through the current credit climate.
Course dates