Energy Trading and Risk Management

This book offers important insights into the intricacies of energy trading and risk management to students and professionals in the liberalized electricity and natural gas markets. In its opening chapter, the book delves into fundamental concepts, including price formation on wholesale markets. The various market places and trading products are presented, and the distinguishing characteristics of electricity and natural gas compared to other commodities are emphasised. Moving forward, the next chapter concentrates on portfolio management, offering insights into the trading process through the perspectives of various agents. It begins with proprietary traders and progresses to encompass the portfolio management activities of integrated companies responsible for both generation assets and a retail client base. The book then looks at risk management, explaining the diverse risks that impact the value of energy portfolios in the market. It places emphasis on credit risk, price risk, quantity risk, and product liquidity risk as the most influential factors and presents effective practices for their management. Furthermore, readers will gain a comprehensive understanding of how to manage quantity risk and its interconnectedness with price risk. Additionally, the book addresses the measurement of product liquidity and its disparities across different energy market products. In summary, this book is an accessible introduction and a concise reference for students and professionals across all fields of energy.

Professor Müsgens holds the Chair of Energy Economics at Brandenburg University of Technology and is leading BTU's energy innovation centre. He has experience in energy trading and portfolio management from heading Trianel's portfolio management department as well as numerous ETRM consulting projects for various companies. His research focuses on energy economics, energy data analytics, and energy system modelling, culminating in more than 100 publications. Mr. Müsgens is member of numerous committees (e.g., Scientific Advisory and Project Board of 50Hertz), associated researcher at EPRG (University of Cambridge), and acted as elected scientific representative at the Exchange Council of the European Energy Exchange (EEX) until 2021. Mr. Müsgens received his doctorate at the Institute of Energy Economics (EWI) and the DFG Graduate School of Risk Management at the University of Cologne. Professor Bade holds the Chair of Energy Economics and Management at Albstadt-Sigmaringen University and is Dean of Studies for energy economics at the Department of Business Science and Management. His current research focuses on modelling and marketing flexibility potentials in energy-intensive industrial processes. As part of the European Commission/Horizon Europe project Flex4Fact, he was instrumental in driving forward the modelling of short-term and flexibility markets. Prof. Bade has published numerous scientific papers and regularly gives lectures on current developments in the energy markets. He also advises companies on the implementation of digitization strategies in rapidly changing energy markets. Before taking up his professorship, Mr. Bade gained over a decade of experience in various positions as energy market consultant and risk controller in the energy industry. He received his doctorate at the DFG Graduate School of Risk Management at the University of Cologne.

List of Figures.- PREFACE.- 1. Introduction.- 2. Products and Markets.- 3. Portfolio Management.- 4. Risk Management.- 5. Literaturverzeichnis.- 6. Glossary.