This website serves the energy market community in the exchange of knowledge.
This non-profit website has been developed in order to provide an easier access to research and articles available in this area, but which is often hard to find.
Our approach:
o Share access to energy market articles
o Post and answer questions
The target user group and audience: (quantitative) analysts, traders, risk managers, researchers, business developers, financial managers, consultants and policy makers.
Erasmus Energy is willing to publish all kinds of articles on energy markets. Main topics are risk-management, trading, valuation and market development. Articles should be relevant and clear.
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Featured Articles
Realistic power plant valuations
- By Cyriel de Jong
- Published 08/27/2009
- Valuation
-
Rating:
Published in WorldPower 2009
Authors: Henk Sjoerd Los, Hans van Dijken, Cyriel de Jong. KYOS Energy Consulting
The large investments in new power generation assets illustrate the need for proper financial plant evaluations. 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 volatility and cointegration to incorporate market fundamentals and calculate dynamic, yet reasonable, spread levels and power plant values. A practical case study demonstrates how various technical and market constraints impact plant value. It also demonstrates that plant value may contain considerable option value, but 64% less than with the usual real option approaches. We conclude with an analysis of static and dynamic hedges affecting risk and return profiles
Recent Articles
Cointegration between gas and power spot prices
- By Cyriel de Jong
- Published 08/23/2010
- Price modeling
- Unrated
Keywords: power prices, cointegration, regime switching, spot prices
Published in: The Journal of Energy Markets
Publication year: 2009, Volume 2, Number 3
Co-author 1: Stefan Schneider, EON Energy Trading
In this paper we show how cointegration can be applied to capture the joint dynamics of multiple energy spot prices. As an exemplary system we study the gas spot markets TTF, Zeebrugge and NBP, and additionally the power spot market APX, since these markets are strongly connected in terms of physical transportation and generation of power from gas. We develop a cointegrating multi-market model framework which is able to plausibly connect different single market spot price models. This is achieved by considering the mean-reverting spot-forward price spreads instead of spot prices only. Our analysis shows that the gas prices are strongly cointegrated, with a specific connection pattern of the markets, whereas cointegration of gas and power prices is on long-term forward price levels only.
