Hourly resolution forward curves for power: statistical modeling meets market fundamentals

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A Cartan-Hadamard type result for relatively hyperbolic groups

In this article, we prove that if a finitely presented group has an asymptotic cone which is tree-graded with respect to a precise set of pieces then it is relatively hyperbolic. This answers a question of M. Sapir.Comment: 33 pages, 2 figure

Bioengineering options and strategies for the optimization of anaerobic digestion processes

Anaerobic digestion (AD) is a complex biological process, and the microbial diversity and dynamics within the reactor needs to be understood and considered when process optimization is sought after. Microbial interactions such as competition, mutualism, antagonism and syntrophism affect the function and the survival of single species in the community; hence, they need to be understood for process improvement. Although the relationship between process performance and the microbial community structure is well established, changes in the community might occur without detectable changes in gas production and reactor performance. Recent molecular-based studies have highlighted the complexity of AD systems revealing the presence of several uncultivated species and the need for further research in this area. However, this information is still rarely used for process optimization. The integration of next generation sequencing technologies, such as 454-pyrosequencing, with other techniques, such as phospholipid-derived fatty acids analysis, can provide a holistic understanding of the microbial community. In addition, the in-depth phylogenetic resolution provided can aid environmental ecologists and engineers to better understand and optimize the AD process and consolidate the information collected to date

Electricity price modeling and asset valuation: a multi-fuel structural approach

We introduce a new and highly tractable structural model for spot and derivative prices in electricity markets. Using a stochastic model of the bid stack, we translate the demand for power and the prices of generating fuels into electricity spot prices. The stack structure allows for a range of generator efficiencies per fuel type and for the possibility of future changes in the merit order of the fuels. The derived spot price process captures important stylized facts of historical electricity prices, including both spikes and the complex dependence upon its underlying supply and demand drivers. Furthermore, under mild and commonly used assumptions on the distributions of the input factors, we obtain closed-form formulae for electricity forward contracts and for spark and dark spread options. As merit order dynamics and fuel forward prices are embedded into the model, we capture a much richer and more realistic dependence structure than can be achieved by classical reduced-form models. We illustrate these advantages by comparing with Margrabe's formula and a simple cointegration model, and highlight important implications for the valuation of power plants

The valuation of clean spread options: linking electricity, emissions and fuels

The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the use of a structural model as opposed to reduced-form models which fail to capture properly the fundamental dependencies between the economic factors entering the production process

A model for hedging load and price risk in the Texas electricity market

Energy companies with commitments to meet customers’ daily electricity demands face the problem of hedging load and price risk. We propose a joint model for load and price dynamics, which is motivated by the goal of facilitating optimal hedging decisions, while also intuitively capturing the key features of the electricity market. Driven by three stochastic factors including the load process, our power price model allows for the calculation of closed-form pricing formulas for forwards and some options, products often used for hedging purposes. Making use of these results, we illustrate in a simple example the hedging benefit of these instruments, while also evaluating the performance of the model when fitted to the Texas electricity market

ADAPT: a price-stabilizing compliance policy for renewable energy certificates: the case of SREC markets

Currently most Renewable Energy Certificate (REC) markets are defined based on targets which create an artificial step demand function resembling a cliff. This target policy produces volatile prices which can make investing in renewables a risky proposition. In this paper, we propose an alternative policy called Adjustable Dynamic Assignment of Penalties and Targets (ADAPT) which uses a sloped compliance penalty and a self-regulating requirement schedule, both designed to stabilize REC prices, helping to alleviate a common weakness of environmental markets. To capture market behavior, we model the market as a stochastic dynamic programming problem to understand how the market might balance the decision to use a REC now versus holding it for future periods (in the face of uncertain new supply). Then, we present and prove some of the properties of this market, and finally we show that this mechanism reduces the volatility of REC prices which should stabilize the market and encourage long-term investment in renewables