Posts Tagged "electricity"

Critique of IHS Markit Nuclear Resilience Paper

In April 2018, IHS Markit published a paper entitled “Ensuring resilient and efficient PJM electricity supply; The value of cost-effective nuclear resources in the PJM power supply portfolio.” Several clients contacted us regarding the paper, expressing a concern that it presented a number of wrong-headed, anti-market ideas, and requesting our thoughts. Here they are. read more →

IRC Resource Investment Study

Market Reform was engaged by the ISO/RTO Council (IRC), the umbrella group for the nine US and Canadian electricity system/market operators, to investigate the factors that drive financial investment in generation and other system resource, and how these are influenced by ISO policy/market design decisions and the revenue streams flowing out of the ISO-operated markets. This final report was presented to the IRC’s Annual Board Conference in May 2015. read more →

PJM Credit and Clearing

Following some significant financial defaults by participants in its markets, PJM engaged Market Reform to provide advice concerning how it could improve its management of credit risk. A benchmarking study of credit risk management practices in a range of spot electricity and other markets was also conducted. This work also helped to inform subsequent rule-making by FERC. Normally our client work is confidential, but in this instance PJM has placed it in the public domain, allowing it to be made available here.
read findings and recommendations report →
read credit comparison report →

Regional Electricity Trading: Opportunities and Challenges for Ontario

The purpose of this paper is to discuss the role of regional trade in electricity, the costs and benefits of expanding regional trade, some of the obstacles to such expansion and what might be done to reduce these obstacles. Although the discussion often refers to Ontario and its context within Canada and North America, most of the discussion here is general and applies to any large, modern electricity system. read more →

In Defense of Markets

Since electricity restructuring and competition first commenced it has been opposed by an assortment of anti-market naysayers and recalcitrants, some driven by philosophical dislike, and others by the desire to preserve a lucrative status quo. Over the years, these groups have advanced a steady litany of excuses regarding why markets won’t work – which have been just as quickly debunked by real examples of success … The excuses of the anti-marketeers are no more than delaying tactics. Ultimately, competition must prevail. read more →

Spot Market Clearing

Recent years have seen a growing awareness of credit issues in the energy industry, and improved efforts to manage these risks. Despite this trend, however, the credit risk protections employed by most electricity spot markets remain rudimentary, placing participants at risk of receiving a socialized share of large, unpredictable and unhedgeable losses. Spot Market Clearing offers a comprehensive solution to this problem, leveraging the proven clearing house infrastructure of futures markets, and extending it, to provide robust counter-party credit protection for spot markets in electricity. read more →

Competitive Electricity Markets: Opportunity or Threat? A Customer Perspective

Recent electricity price rises experienced by eligible customers have led to some discontent with the outcomes of market competition. Rather than a discussion of philosophical pros and cons, this paper takes a pragmatic look at the implications of competition for a medium-to-large sized customer. Specifically, it examines the challenges this creates for customers, given the unique nature of electricity, how customers can respond to these challenges, and potential opportunities this might provide. read more →

The Case for Financially-Settled Electricity Contracts

Forward contracts reaching maturity result in one of two outcomes – physical delivery or financial settlement. This paper puts forward the argument that, where reliable spot market price indices exist, electricity derivatives should be financially-settled. read more →

Taking Care of Risky Business: Credit Risk Management in Spot Markets

The collapse of Enron and recent energy industry credit crunch has again brought the issue of energy market credit risk management to the fore. An oft neglected area in these discussions is the management of spot market credit risk. Unlike forward markets, where fairly sophisticated risk management processes are available, the management of credit risk in many spot markets remains rudimentary. Changes to a few key processes, however, could significantly improve the way this risk is managed. read more →

The Application Of OR Techniques In The Certification Of Software Used To Clear Electricity Markets

As increasingly sophisticated electricity markets develop, the software used to clear these markets will become more complex. The output of such market clearing programs has financial implications for market participants. It is very important, therefore, that their programs are tested rigorously before certification. The combination of engineering and economic principles used, and the complexity of the formulations underlying these programs, make this task challenging. read more →