Hedging Exposure to Electricity Price Risk in a Value at Risk Framework

This paper deals with the question how an electricity end-consumer or distribution company should structure its portfolio with energy forward contracts. This paper introduces a one period framework to determine optimal positions in peak and off-peak contracts in order to purchase future consumption volume. In this framework, the end-consumer or distribution company is assumed to minimize expected costs of purchasing respecting an ex-ante risk limit defined in terms of Value at Risk. Based on prices from the German EEX market, it is shown that a risk-loving agent is able to obtain lower expected costs than for a risk-averse agent.Electricity prices;Forward risk premium;Hedge ratios;Mean variance

Electricity Portfolio Management: Optimal Peak / Off-Peak Allocations

Electricity purchasers manage a portfolio of contracts in order to purchase the expected future electricity consumption profile of a company or a pool of clients. This paper proposes a mean-variance framework to address the concept of structuring the portfolio and focuses on how to allocate optimal positions in peak and off-peak forward contracts. It is shown that the optimal allocations are based on the difference in risk premiums per unit of day-ahead risk as a measure of relative costs of hedging risk in the day-ahead markets. The outcomes of the model are then applied to show 1) whether it is optimal to purchase a baseload consumption profile with a baseload forward contract and 2) that, under reasonable assumptions, risk taking by the purchaser is rewarded by lower expected costs.G11;electricity portfolio management;forward risk premiums;hedge ratio;optimal electricity sourcing

Hedging Exposure to Electricity Price Risk in a Value at Risk Framework

This paper deals with the question how an electricity end-consumer or distribution company should structure its portfolio with energy forward contracts. This paper introduces a one period framework to determine optimal positions in peak and off-peak contracts in order to purchase future consumption volume. In this framework, the end-consumer or distribution company is assumed to minimize expected costs of purchasing respecting an ex-ante risk limit defined in terms of Value at Risk. Based on prices from the German EEX market, it is shown that a risk-loving agent is able to obtain lower expected costs than for a risk-averse agent

Electricity Portfolio Management: Optimal Peak / Off-Peak Allocations

Electricity purchasers manage a portfolio of contracts in order to purchase the expected future electricity consumption profile of a company or a pool of clients. This paper proposes a mean-variance framework to address the concept of structuring the portfolio and focuses on how to allocate optimal positions in peak and off-peak forward contracts. It is shown that the optimal allocations are based on the difference in risk premiums per unit of day-ahead risk as a measure of relative costs of hedging risk in the day-ahead markets. The outcomes of the model are then applied to show 1) whether it is optimal to purchase a baseload consumption profile with a baseload forward contract and 2) that, under reasonable assumptions, risk taking by the purchaser is rewarded by lower expected costs

A new method to detect long term trends of methane (CH₄) and nitrous oxide (N₂O) total columns measured within the NDACC ground-based high resolution solar FTIR network

Total columns measured with the ground-based solar FTIR technique are highly variable in time due to atmospheric chemistry and dynamics in the atmosphere above the measurement station. In this paper, a multiple regression model with anomalies of air pressure, total columns of hydrogen fluoride (HF) and carbon monoxide (CO) and tropopause height are used to reduce the variability in the methane (CH4) and nitrous oxide (N2O) total columns to estimate reliable linear trends with as small uncertainties as possible. The method is developed at the Harestua station (60°N, 11°E, 600ma.s.l.) and used on three other European FTIR stations, i.e. Jungfraujoch (47°N, 8°E, 3600ma.s.l.), Zugspitze (47°N, 11°E, 3000ma.s.l.), and Kiruna (68°N, 20°E, 400ma.s.l.). Linear CH4 trends between 0.13±0.01-0.25±0.02%yr−1 were estimated for all stations in the 1996-2009 period. A piecewise model with three separate linear trends, connected at change points, was used to estimate the short term fluctuations in the CH4 total columns. This model shows a growth in 1996–1999 followed by a period of steady state until 2007. From 2007 until 2009 the atmospheric CH4 amount increases between 0.57±0.22–1.15±0.17%yr−1. Linear N2O trends between 0.19±0.01–0.40±0.02%yr−1 were estimated for all stations in the 1996-2007 period, here with the strongest trend at Harestua and Kiruna and the lowest at the Alp stations. From the N2O total columns crude tropospheric and stratospheric partial columns were derived, indicating that the observed difference in the N2O trends between the FTIR sites is of stratospheric origin. This agrees well with the N2O measurements by the SMR instrument onboard the Odin satellite showing the highest trends at Harestua, 0.98±0.28%yr−1, and considerably smaller trends at lower latitudes, 0.27±0.25%yr−1. The multiple regression model was compared with two other trend methods, the ordinary linear regression and a Bootstrap algorithm. The multiple regression model estimated CH4 and N2O trends that differed up to 31% compared to the other two methods and had uncertainties that were up to 300% lower. Since the multiple regression method were carefully validated this stresses the importance to account for variability in the total columns when estimating trend from solar FTIR data

Spectrometric Monitoring of Atmospheric Carbon Tetrafluoride (CF4) Above the Jungfraujoch Station Since 1989: Evidence of Continued Increase But at a Slowing Rate

The long-term evolution of the vertical column abundance of carbon tetrafluoride (CF4) above the high-altitude Jungfraujoch station (Swiss Alps, 46.5 ° N, 8.0 ° E, 3580 ma.s.l.) has been derived from the spectrometric analysis of Fourier transform infrared solar spectra recorded at that site between 1989 and 2012. The investigation is based on a multi-microwindow approach, two encompassing pairs of absorption lines belonging to the R-branch of the strong ν3 band of CF4 centered at 1283 cm-1, and two additional ones to optimally account for weak but overlapping HNO3 interferences. The analysis reveals a steady accumulation of the very long-lived CF4 above the Jungfraujoch at mean rates of (1.38 ± 0.11) x 1013 molec cm-2 yr-1 from 1989 to 1997, and (0.98 +/- 0.02) x 1013 molec cm-2 yr-1 from 1998 to 2012, which correspond to linear growth rates of 1.71 ± 0.14 and 1.04 ± 0.02% yr-1 respectively referenced to 1989 and 1998. Related global CF4 anthropogenic emissions required to sustain these mean increases correspond to 15.8 ±1.3 and 11.1 ± 0.2 Gg yr-1 over the above specified time intervals. Findings reported here are compared and discussed with respect to relevant northern mid-latitude results obtained remotely from space and balloons as well as in situ at the ground, including new gas chromatography mass spectrometry measurements performed at the Jungfraujoch since 2010