ENERGY RISK MANAGEMENT Figure 2: Optimization; Stochastic Approach Supporting the daily business is a crucial point for the acceptance of any optimization tool
Source: OpenLink
CPU load, and parallelization of theMC optimization runs is favourable (grid computing). Though MC simulations provide key risk numbers,
it doesn’t help you in finding the optimum utilization of assets taking into account the volatility of prices and volumes. This stochastic problem can be tackled by introducing a risk-adjusted monetary term based on statistical scenarios. This cost term is then part of the overall system costs to be minimized in the optimization run.
Optimization software ... supports the establishment of the best economic outcomes ...
The application of this stochastic approach on the
one hand allows the consideration of price and volume risks within a single optimization run (providing an optimal risk adjusted strategy) and on the other hand (due to an elegant methodology) it allows taking into account a large number of scenario for calculation of the whole energy system without compromising the modeling details. This methodology merges the risk reduction and optimization approaches, allowing users to decide on the degree of ‘risk appetite’. A risk adjusted optimal strategy can then value
with the usual risk management tools for measuring remaining risks.
Summary To summarize all the arguments above, the expanded
ETRM – as introduced and developed by OpenLink – is a new step in the development of IT tools and instruments for integrated companies which own production assets, and is based on the seamless integration of advanced optimization tools and techniques with high-end
60 December 2012
trading and risk management functionality. This integration provides:
• ROI usually within 1 year due to overall maximization to companies’ profits.
• High degree of automation and low operational risk (master data which are coherent at any time).
• (Near) Real-time availability of relevant information through the company.
• Transparency of decisions.
• Reliable integrated coherent trading and planning strategies for market activities and resource management.
Optimization software – which models the supply- demand situation for multi-commodity portfolios – supports the establishment of the best economic outcomes, taking into account the uncertainties and will usually increase profits from around a half percent for small portfolios up to a few percentage points for complex multi-billion dollar ones ... and at the same time reducing both market and operational risk. •
Dr. Christian Hausleitner, Dr. Irina Reitgruber & Dr. Markus Seiser, OpenLink.
OpenLink’s ETRM systems help increase performance beyond classical E/CTRM – Four integrated solutions that together maximize the ability to optimize
operating and trade performance, including: Trading and Risk Management (Front-to-Back Office E/CTRM), Resource Management (Time Series Management, Optimization Forecast), Producer Services and Mid- Stream Processing and Logistics & Scheduling (for Power, Gas and Bulk Commodities).
For more information go to:
www.OpenLink.com
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