Energy Risk: implications of carbon floor on power plant hedging

The UK carbon floor raises the cost of CO2 emissions by power producers and thereby increase power prices. The mechanism has important implications for the valuation of power stations. KYOS explains how the UK carbon floor impacts delta hedging of power stations.

KYOS chapter in best-selling energy risk book by V. Kaminski: gas storage pricing and hedging

Cyriel de Jong has completely rewritten his chapter on gas storage pricing and hedging, which provides an excellent description of the best-practice trading and valuation strategies for gas storage.

Journal of Natural Gas Science and Engineering: Gas storage review article

Various approaches have been suggested for the valuation of gas storage. Of those approaches, the most general ones are based on Monte Carlo price simulations. These approaches allow the evaluation of different market trading strategies and different assumptions about the underlying price process.

KYOS report: Use renewable production information for a green price forward curve

In this report we study the effect of renewable power production on the intra-day shapes in Germany. The analysis shows that green production is an important component. Furthermore, the report shows that the sensitivity to renewables varies per hour and weekday.

White paper: How to effectively hedge the value of a power station

Operators of power stations try to maximize the income from their assets. Power plant valuation models aim to predict the total value that can be made in a future time period. With delta hedging, this value can partly be locked.

ET: How renewables shape the future in Germany

In 2012, the German capacity of solar energy passed the 32 GW mark. Together with the growth in wind power generation, this has depressed market prices. In this article, we take a detailed look at how this is further going to shape future price levels

White paper: Guidelines for valuation of real options in energy markets

To improve power plant hedging decisions, a range of methodologies is available for forward curve building, Monte Carlo simulation, (stochastic) dynamic programming, and least-squares Monte Carlo. This document describes the main methodologies and provides a few tests for their quality, particularly focusing on power plants.

Report: active trading strategy to realize value with a gas storage in a difficult market

The years 2010 and 2011 have been a challenging period for many storage operators. The authors of the following article, Marcus Nossman, Cyriel de Jong, Hans van Dijken show that an active trading strategy is important. With this it is possible to achieve a substantial premium income from your storage facility. Even in challenging times!  Article summary:… Read more »

Journal of Risk: Non-parametric Value-at-Risk forecasts

This paper proposes a new model for computing Value-at-Risk forecasts. It incorporates information about the market’s perceived uncertainty about the future from volatility indices.

Energy Risk: Comparing power plant delta hedging strategies

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.