http://www.erasmusenergy.com en-us N/A dejong@maycroft.com Sun, 07 Sep 2008 15:45:38 CEST 20 http://www.erasmusenergy.com/articles/6/1/Modelling-weather-sensitive-electrical-loads/Page1.html Published in: Energy Risk
Publication year: 2002
Co-Author 1: Aram Sogomonian
Co-Author 2: Glen Swindle

This article presents an integrated approach to modelling temperature,electrical loads and power prices. This modelling framework will be used to analyse and manage the risks associated with serving variable quantities of load. The objective of the analysis is a better understanding and control of the earnings volatility associated with variable load risk.
The short-term variability of electrical loads is driven by temperature, season and time of day. Serving full-requirement load obligations involves assuming the uncertainty in the amount of power that will have to be delivered on a given day and hour. Forward power purchases can only hedge the quantity expected to be delivered, leaving the supplier with the risk associated with serving the deviations – whether positive or negative – from the expected load. This risk is termed variable load risk.
The financial risks associated with serving variable load obligations are compounded by the correlation between load and prices. High loads are often accompanied by high prices and low loads by low prices. If a load supplier is left short in a high-price environment or long when temperatures and loads are moderate, its earnings will suffer.
Here we introduce a new methodology for forecasting and jointly simulating temperatures and electrical loads. The mathematical analysis is presented in conceptual terms. The applications chosen to illustrate the methodology are load forecasting used to value full-requirement obligations and short-term load forecasts based on weather predictions. A later article will focus on simulating prices in the power markets and will present an integrated approach to managing variable load risk and reducing the earnings volatility of companies serving full-requirement load obligations.]]> no@spam.com (Veronique Bugnion) Thu, 20 Sep 2007 11:24:39 CEST http://www.erasmusenergy.com/articles/6/1/Modelling-weather-sensitive-electrical-loads/Page1.html