Basics in Energy Finance CEMS

Climate change, nuclear phase-out, supply bottlenecks: nature, politics and technology are joined by economic challenges.

The global wave of liberalization in the electricity supply sector has brought competition into traditionally monopolistic and regulated business areas. A wide variety of technologies and a similar number of regulators operate in Europe. Their interplay causes complex interactions, and the introduction of CO2 certificates has added a further uncertainty factor to this market environment.

Ordinary methods from financial mathematics quickly reach their limits. Transmission and financing in the electricity market work at lightning speed - in contrast, there are fixed grid capacities and the problem that electrical energy can very rarely be stored profitably. This makes electricity a commodity with derivative characteristics.

This course deals with the development of and challenges in energy markets. Various market models are examined, as well as quantitative methods for evaluating investment and management strategies. The prevailing uncertainty is of particular importance for risk considerations.

Stochastic influencing factors such as electricity and fuel prices, usable quantities of wind/hydro/sunshine and a changing demand situation must be optimally combined. This results in a maximum value for flexible investments such as options, swing options or flexible power plants. Finally, this lecture deals with the EU Emission Trading System (ETS) and the application of Kyoto mechanisms.