Managing Price Risk with Price Forecasting

In continuously evolving power markets, with highly volatile electricity prices, market participants are interested in managing their price risk in addition to their volumes and other risks. Price information from future contracts traded on standard markets do not provide the flexibility or granularity required for different intervals, such as hours of the days or weekdays. With electricity consumption different at time of the day, week and seasons, and affected by weather conditions, this may lead to unanticipated price changes. Having access to accurate price expectations is therefore very relevant. This is how a forward price curve will help you Manage Price Risk with a Price Forecaster! The emergence of less predictable renewable electricity generation has increased volatility in power markets, where positions may change rapidly. In addition, less liquid markets may not provide enough pricing information. Portfolio Managers who can forecast wholesale power prices position themselves to adjust their trading strategy or their generation and demand plans, thereby managing their price risk. Where modern ETRM systems already provide real-time position information, what-if risk scenarios capabilities, and price curve management, these functions can be further leveraged when the system is equipped with and integrated ability to forecast short and long-term power… continue reading

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