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ENERGY RISK MANAGEMENT


Figure 1: Multi-Commodity – Multi-Asset Optimization The results of portfolio optimization are the optimum utilization for all assets


... is necessary to minimize realistic production costs


and to indicate all market opportunities. Only exact modeling of the energy system can provide realistic estimations of possible profits across the portfolio. Additional objectives such as a smooth schedule of


certain power plants or high reservoir levels at the end of the calculation period are included in the objective function using penalties or credits. Soft restrictions can also be modelled to allow deviations from specified restrictions in order to achieve additional cost savings or revenue increases. The results of portfolio optimization are the optimum utilization for all assets with the goal of maximizing revenues or minimizing costs. The optimization results are given as time series/scheduling data for the whole planning horizon as follows:


• Production volume time series for each generating asset


• Ancillary services time series for each generation asset


• Purchase volume time series for each contract/market


• Transport volume & losses time series for each transmission line


• Content & inflow/release time series for each hydro reservoir


• Content & Injection/withdrawal volume time series for each storage


• Local marginal prices & hydro reservoir shadow prices.


Based on these derived results data can be


determined in specific post processes (e.g. total P&L, plant productions, maximum used transmission capacity, nodal open positions, etc.).


Additionally, due to the increasing volatility of


input parameters the ‘classic’ optimization has to be enhanced by methods for ‘what-if’ analysis, stress testing, risk assessment and risk hedging.


Importance in Expanding the Horizons of Classical ETRM For the realization of processes mentioned above,


optimization must functionally be tightly connected/ integrated to ETRM processes in near real-time. There is no contradiction between the target of each individual trader to maximize the profit from his/her trading portfolio and the goal of the target of overall portfolio optimization to maximize the company’s value. It is only a question of aligning the strategies, giving traders corresponding informational tools and defining the degrees of freedom.


The results of portfolio optimization are the optimum utilization for all assets


The precondition for the successful combination of


both goals is the IT – with the supported workflows providing the trader with all needed information on global planning and with a framework allowing checks on the trader’s potential deals against the global optima. The systems provide a trader with such smart tools, which are fully integrated with the usual ETRM functionality. OpenLink’s transaction lifecycle management


provides optimization and risk tools for the whole company portfolio, not only as pre- or post-processing for ETRM functions, but seamlessly integrated into the ETRM functions, giving new quality to the planning and trading results.


December 2012 57


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