Publications - Power Markets

Overview:

► Hamitabad power plant value assessment (independent analysis KYOS and B&W, 2012)

► Power plant hedging strategies: comparing delta hedge approaches (Energy Risk, 2012)

► Realistic power plant valuations: How to use cointegrated power & fuel prices (WorldPower, 2009)

► The value of starting up the power plant (WorldPower 2010)

► Effective pricing of wind power: uncertainties in wind production often priced at too low levels (WorldPower 2008)

► Pricing of DONG Virtual power plant for Q1-2011 and Yr-2011 (independent analysis)

See also:
Gas market publications. Click here.
Risk and pricing publications. Click here.

Hamitabad power plant value assessment (Turkey)

January 2012
Independent analysis by KYOS Energy Consulting  and B&W Energy Consultancy

Turkish summary: Bu rapor Hamitabad elektrik santralinin değerlendirme sonuçlarını göstermektedir.  Santral İstanbul’a yakın bir il olan Kırklareli’nde bulunmaktadır ve Türk hükümeti tarafından özelleştirilmektedir. Santral ilk olarak 1990 yılında inşa edilmiştir ve 1120 MW maksimum kapasiteye sahiptir.  Değerlendirme 2012-2020 dönemi açısından Türk enerji piyasası  için vadeli işlemler ile spot fıyatı varsayımları temelinde yapılmıştır. Biz %48 saatlik üretim ile elde edilecek miktarı 664 milyon € olarak değerlendiriyoruz. 1120 MW’lik santral kapasitesi ile bu sayıyı böldüğümüzde, 575 €/kWh. sonucunu elde ediyoruz.

Summary: This report presents the results of the valuation of the Hamitabad power station. It is situated in Kirklareli, close to Istanbul, and is now being privatized by the Turkish government. The power plant was originally constructed in 1990 and has a maximum capacity of 1120 MW. The valuation has been performed on the basis of forward and spot price assumptions for the Turkish power market for the period 2012-2020.

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Power plant hedging strategies: comparing delta hedge approaches

Energy Risk, 2012
Hans van Dijken, Alexandra Bundalova and Cyriel de Jong

Summary: A comparison of common delta-hedging strategies and calculations finds that simple formulas used to calculate delta hedges can lead to severe biases. This article presents a relatively fast, but more accurate calculation approach. It is based on a combination of Monte Carlo price simulations and dispatch optimization, using dynamic programming.  

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Realistic power plant valuations: How to use cointegrated power & fuel prices

WorldPower, 2009
Hans van Dijken, Henk Sjoerd Los and Cyriel de Jong

Summary: Traditional net present value (NPV) analysis disregards the flexibility to adjust production decisions to market developments, and thus underestimate true plant value. On the other hand, methods treating power plants as a series of spread options ignore technical and contractual restrictions, and thus overestimate true plant value. In this article we demonstrate the use of cointegration to incorporate market fundamentals and calculate dynamic, yet reasonable, spread levels and power plant values.

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The value of starting up the power plant

WorldPower, 2010
Hans van Dijken, Dirk van Abbema, Henk Sjoerd Los and Cyriel de Jong

Summary: In this article we demonstrate the impact of various start-stop constraints and costs for the value of a power station. This impact analysis is possible by applying advanced techniques for generating realistic Monte Carlo price simulations in combination with techniques for optimizing the production pattern. Techniques include dynamic programming and least-squares Monte Carlo..  

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Effective pricing of wind power: uncertainties in wind production often priced at too low levels

WorldPower, 2008
Hans van Dijken and Cyriel de Jong

Summary: This article describes the pricing and hedging of wind power contracts. It demonstrates that substantial discounts relative to baseload power prices are reasonable to cover the negative wind-price correlation and to cover the difficulty of hedging price risks.  

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Pricing of DONG VPP for Q1-2011 and Yr-2011

KYOS Analysis, 2010

Summary: This report presents the results of the valuation of a virtual power plant contract (VPP). The VPP is offered by DONG Energy for the 1th quarter of 2011 and for year 2011, with the Danish DK1 market as a reference. The report explains the whole process to come to a valuation: from current market prices to simulations of future prices and VPP cash-flows. We find a higher extrinsic value than has been paid for in the market.

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