Energy Scenario Management
Energy Scenario Management Figure 2: Complex Information on One Central Module
the ability to ‘stress test’ the portfolio, the trader/manager could gain a more complete and robust view of their actual risk position (and the alternatives) in real-time – not to mention the competitive advantages this would bring. What is required, therefore,
is a system which truly integrates all the different aspects of the business; which (as their name suggests) has been the guiding principle for ETRM market leader OpenLink Financial Inc. since it began operations in 1992. A ‘Smart ETRM’ is required
according to Dr. Wolfgang Ferse,
EVP commodities
& energy solutions with OpenLink.
“Such a
configuration provides traders and risk managers with important information about the impact of decisions on logistics and transportation. This additional decision-support facility is now highly critical.” Thus, combining an optimisation engine with a sophisticated
trading system provides a more complete and performance driven view of the business overall. The traditional ‘silo’ approach to power and gas trading is no
longer sufficient. A good example is that, in many companies, the physical planning department is not linked to the trading area/decision making process. What is required, therefore, is to marry classical business activities with real-time ETRM/ CTRM systems, utilsing optimisation techniques to provide a complete Energy Scenario Management architecture (Figure 2). In such a configuration, all the elements of the business are brought together making information available – and meaningful – in this complex environment. In this way energy traders/managers can get a comprehensive understanding of the business, reducing the overall risk of the company’s combined processes. All the different elements of the business are brought together, with all data in one place, giving management the ability to see the
worldPower 2010
true picture of risk and model scenarios visibly in real-time. This overcomes one of the major gaps that currently exists in the risk management process at many firms – the lack of communication between risk groups and the senior management team, which means substantial amounts of resources are wasted implementing models and creating reports without actionable information. Internal calculations by OpenLink suggest that with the
All the different elements of the business are brought together, with all data in one place
adoption of its integrated solution, a relatively small and simple gas portfolio, for example, could increase profits by around half a percentage point, while for a more complex €1 billion diversified energy portfolio, the figure could amount to several percentage points. What makes the OpenLink solution
different from other vendor offerings is that, in recognition of the inherent
uncertainty of forecasting due to extreme volatility, it can link together simulation with optimisation so that an optimisation can be embedded within each valuation run. Financial and physical contracts, different commodities and markets, together
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