WorldPower 2010 Contents
Foreword
By Guy Isherwood; Editor
Welcome to this 11th edition of WorldPower – the annual publication dedicated to research, technical articles, and key market intelligence and statistics on developments in the global traded power markets.
World Power Markets
WorldPower
The economic and financial crisis resulted in a reduction of world energy demand in 2009 by 1% or 130 Mtoe to 12.1 Gtoe. This was the first demand decrease in 30 years, and the first decrease in electricity demand since World War II.
World Power Generation
WorldPower
Power generation throughout the world and regions.
World Energy Markets - Map/Statistics
WorldPower
Energy Consumption, Production and Reserves by region.
Section 1: Power Dynamics
Power Connections
By Dr. Alessandro Clerici & Elena Virkkala Nekhaev; World Energy Council
The most important benefits and challenges of interconnected electricity networks: In terms of the electricity value chain, transmission on average accounts for less than 10-15% of the final cost paid by the end-user for each kWh. Today, however, transmission is becoming a key issue for the effective operation of liberalised markets and their further development. An integrated and adequate transmission infrastructure is of utmost importance for ensuring the delivery of the most competitively priced electricity to customers, both near and far from power generating facilities.
The Foothills of Economic Recovery
By Stephen A. Stolze; Black & Veatch Corporation
Strategic Directions in the US Electric Utility Industry – 2010: Following the deep recession of 2009 the US Economy has levelled off and entered what could be an extended period of slow growth. The strength of financial institutions is recovering from unimaginably weak levels; and credit is increasingly available at moderate rates for high quality, reasonably leveraged opportunities. Counterbalancing these positive indicators are the yet to be known economic impacts of sovereign risks in the European Union, continued high unemployment and the inevitability of substantial tax increases lingering on the near-term horizon. From an energy point of view, the events of late 2008 and 2009 resulted in considerable US and European energy demand destruction that will take several years to recover.
What Does Exchange Trading Bring To Power Markets?
By Mikael Lundin & Geir Reigstad; NASDAQ OMX Commodities
This article looks at the history of the UK power market, the drivers for change, and how the new UK market offering – N2EX – is looking to deliver a level of liquidity in a market which has not seen liquidity growth during the past 10 years.
Transparency in Energy Markets
European Energy Exchange AG (EEX)
After six months of operations, the European Energy Exchange’s Transparency Platform has delivered on its promise, setting the benchmark for the rest of the European energy sector to follow.
The Transparency in Energy Markets platform launched by EEX late last year has met with an excellent response from energy sector participants. With increasing coverage and greater usage by the industry and other interested parties, the service is also expanding its list of reporting companies and preparing for reporting from the solar community.
Smarter, Not Harder - The Way Ahead for Utilities
By James Forrest; CapGemini
As the green shoots of economic recovery begin to emerge (at least for some), industry leaders are starting to peer out of the bunker and survey the damage done by the worst recession since the 1930s. For utilities, the legacy of the recession has been a significant slowing of investment programmes, with companies across the globe revising timelines for development, and cutting funds earmarked for future growth. So what next?
Section 2: Trading & Risk Management
Energy Risk & Trade Management
By Anthony Bordin; Trayport
Hand-in-glove with Trayport’s GlobalVision Trading GatewaySM.
A greater sensitivity to risk in global energy markets has coincided with a rise in demand for Energy Trading and Risk Management (ETRM) systems. ETRM is a category of software applications, architectures and tools that support the business processes associated with the trading of energy commodities. Increasingly more important as energy markets liberalise, ETRM solutions play a vital role in ensuring the smooth, accurate and speedy flow of trades in this market.
Integrated Risk Modelling for Trading & Hedging Decisions
By Carlos Blanco & Michael Pierce; NQuantx
Turning Quantitative Models & Systems for physical and derivatives portfolios in energy and commodity markets into Decision-Support Tools. This article explores some of the benefits of having a shared risk information environment to support trading, valuation, hedging, and risk management decisions. The risk technology and models used by most Energy Trading and Risk Management Systems (ETRM) is years behind from the state of the practice in financial institutions. There are multiple reasons for this system sub-performance.
The European Gas & Power Option Market
By Franck Schuttelaar; Gaselys
The liberalisation and development of the gas and power markets in Europe over the last 15 years has exposed energy consumers and their suppliers to much higher price risks than they were used to in the old administered systems. That is because the volatility of prices set freely in the markets is of a different order compared to the fluctuations in rates set by the public authorities which, although not always fully predictable, are at least frequently smoothed over time. Suppliers and industrial customers have had to adapt their strategies to this growing exposure to the markets. In addition to the volume risk, they now have to actively manage their price risk. The financial communication from the incumbent suppliers is a good illustration of this trend.
The Value of Starting-Up The Power Plant
By Cyriel de Jong, Henk Sjoerd Los, Dirk van Abbema & Hans van Dijken; Kyos Energy Consulting
Avoiding perfect foresight with Least-Squares Monte Carlo: In this article we demonstrate the impact of various start-stop constraints and costs. This impact analysis is possible by applying advanced techniques for generating realistic Monte Carlo price simulations in combination with techniques for optimising the production pattern.
Colateral, Cash Flow & Earnings at Risk
By Carlos Blanco; NQuantx
Time to update your risk metrics and policies?
This article provides an overview of risk metrics that can help trading and marketing groups, as well as the CFO and treasury departments, gain insights into the potential variability of collateral, cash flow and earnings.
Section 3: Technology
Holistic Risk Management Requires Robust Technology
By Guy Isherwood; WorldPower
To keep up with today’s energy market trends for growth and sophistication, traders and managers need to focus on both operational practices and technological capabilities to achieve better performance. For example, firms that lack the capacity for straight-through-processing for managing energy derivatives are exposed to operational risks resulting from inadequate automation and controls. Using new technology to automate key aspects of the trade life-cycle of commodities is therefore imperative.
Energy Scenario Management
By Guy Isherwood; WorldPower
Traditional ETRM/CTRM systems are no longer sufficient if energy sector participants want to effectively assess, manage and simulate risk across the entire business. What is required, therefore, is a system which truly integrates all the different aspects of the business; which has been the guiding principle for ETRM market leader OpenLink Financial Inc. since it began operations in 1992.
Reducing Costs & Improving Risk Management
By Richard Everett; Trayport
With the shift to electronic trading, participants in worldwide commodity markets have become accustomed to the streamlined workflows and improvements in risk and auditability that real-time trading platforms offer. The opportunity now exists to internalise the benefits that real-time trading platforms provide, to improve efficiencies, reduce costs and improve risk management.
Eliminating Spreadsheet Risk: Kill or Cure?
By Stuart Cook; Baringa Partners
Rather than demonising spreadsheets, businesses need to be clear on when it’s right – and when it’s wrong – to use them.
Section 4: Environmental Markets
Environmental Markets Beyond Copenhagen
By Guy Isherwood; WorldPower
The scale and breadth of today’s energy challenge is enormous. But it can and must be met. The recession, by curbing the growth in GHG emissions (albeit temporarily) has made the task of transforming the energy sector that much more difficult and costly. Nevertheless, it has also provided and unique opportunity by offering many countries what the IEA sees as a ‘window of opportunity’ to take action to concentrate investment in low carbon technology.
Global Carbon Markets
By World Bank
The latest annual report from the World Bank on the global carbon market shows that in 2009 it grew to US$144 bn, up 6% from 2008 – despite enduring its most challenging year to date. The global economic crisis negatively impacted both demand and supply sides and, as industrial output plummeted, the demand for carbon assets fell.
Negotiating the Future of the Planet
By Olga Gasson-Zade; Point Carbon
When the Copenhagen conference ended, it appeared that the summit had failed catastrophically. After all, the plenary failed to adopt a document put in front of it by world leaders who represented over 4 billion people and all major groupings among the negotiating countries – much to the dismay of the hosts and majority of the negotiators. Indeed, only five countries objected to the adoption of the Copenhagen Accord. What next?
Promoting Renewables
By Dr. Tobias Paulun; European Energy Exchange AG (EEX)
This article analyses the effects of the obligation by German transmission system operators to buy renewable energy and sell it through the exchange spot markets – first quarter 2010 observations. Among the findings … the obligation to market EEG energy quantities through the exchange has not led to unusual fluctuations in prices or significantly negative prices on the spot market of EPEX Spot.
The G-20 Clean Energy Report
By Guy Isherwood; WorldPower
China takes the lead as global clean energy investments are projected to reach US$200 bn in 2010.
Island Power
By Dr Keith Bowen; Circadian Solar
Island states have particular requirements when it comes to energy generation that often make the conversion to renewables far from straightforward. Dr. Keith Bowen of Circadian Solar looks at the issues and explains what concentrated photovoltaics has to offer.
Global Emissions - Map/Statistics
By WorldPower
CO2 emissions throughout the world and regions.
Fuelling Mobility: Biofuels
By Elena Virkkala Nekhaev; World Energy Council
Governments should promote biofuels within the context of a broader transformation of the transportation sector, as biofuels alone are unlikely to solve all of the world’s transportation-related energy challenges.
Section 5: Generation & Transmission
Unlocking Customer Value: The Virtual Power Plant
By Aaron Zurborg; Ventyx
How does a utility manage the complexities concerning the rollout of pricing, demand response and distributed energy resources for load reduction, ISO/wholesale market participation and/or distribution management? One way is through the use of Virtual Power Plants (VPPs).
Can Desert's Provide the Antidote to the Climate Storm?
By Guy Isherwood; WorldPower
Within 6 hours the world’s deserts receive more energy from the sun than humankind consumes within one year. Deserts cover almost 25% of the world land surface. So to be able to exploit the immense power of the sun from these regions would surely make massive inroads into the world’s power requirements. However, to exploit its great potential as a source of electricity, a number of barriers need to be overcome in order to win the race against climate change.
Putting the 'Smart' into Smart Grid
By Eugen Mayer; Power Plus Communications
With climate change right at the top of the political agenda, governments across Europe are introducing radical compulsory emission reduction targets. In the UK alone, carbon emissions must be slashed from 1990 levels by 34% by 2020, and by at least 80% by 2050. As part of the drive to meet legally binding targets, the UK and others are moving towards a smart grid model for its energy market.
Natural Gas in a Low-Carbon Energy Economy
By Christopher Flavin & Saya Kitasei; Worldwatch Institute
Growing estimates of US natural gas resources, including a new category of ‘unconventional’ gas, suggest that accessible supplies of this least carbon-intensive of the fossil fuels may be far more abundant than previously assumed. This unexpected development creates opportunities for deploying natural gas in a variety of sectors – including power generation, industry, and transportation – to help displace oil and coal, thereby reducing greenhouse gas emissions and improving air quality.
The Promise of Shale
By Guy Isherwood; WorldPower
Advanced drilling techniques have enabled the probing of vast amounts of shale gas. This newfound energy wealth has transformed the US gas industry. This American Revolution in natural gas is considered by many to be able to fuel much of the country’s electric generation for decades to come.
Power Developments India: Initiatives & Challenges
By Rhaul Banerjee; Central Electricity Regulatory Commission, India
The Indian economy is growing at a rapid pace. It is estimated that the GDP will grow at 8-9% per annum over the next decade. This can only be sustained if the power sector grows at a much faster rate as power is a primary resource needed for socio-economic development. The multiplier effect of growth in the power sector on the overall economy is high.
Storage: Changing the Nature of Electricity
By Ross McCracken; Platts
If the electric car has the capacity to turn the oil market on its head, efficient electricity storage will be no less revolutionary for power markets. It would change the very nature of electricity as a commodity and thus the way it trades. It would reduce the amount of required new generation capacity, and challenge the notion that gas-fired power plant is the best fit with intermittent renewables.
Electricity to Gas: A New Storage Model?
By Guy Isherwood; WorldPower
The technologies, fuel choice scenarios and implications of better electricity storage models was described in the previous article. A new concept was recently unveiled with potential seismic repercussions: Can we really – efficiently – turn electricity into gas?
The Age of Wind
By Guy Isherwood; WorldPower
In 2009, wind power contributed around 2% to global electricity consumption, continuing to break records. Global wind energy markets are expected to continue their rapid growth, with the world’s wind power capacity increasing by 160% over the coming five years, according to the annual industry forecast presented by the Global Wind Energy Council. GWEC expects that the global installed wind capacity will reach 409 GW by 2014, up from 158.5 GW at the end of 2009. This assumes an average growth rate of 21% per year – conservative compared to the 29% average growth that the wind industry experienced over the past decade.
Standardisation of Nuclear Reactor Designs
By Irina Borysova; World Nuclear Organisation
The WNA, in its role as the international organization of the global nuclear industry, has in recent months begun to focus intensively on the challenge of achieving greater standardisation in reactor designs. The industry, through the WNA, believes that steady progress toward this objective is essential if the world is to achieve success in the decades ahead in exploiting the full potential of nuclear power as a large-scale source of clean energy.
The WNA vehicle for engaging on this topic is its expert working group on Cooperation in Reactor Design Evaluation and Licensing (CORDEL), which existed since 2007, but is now gearing up to effectively address the challenges.
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