All figures correct at time of writing.
Utilities, or electricity suppliers, provide their customers with electricity based on scheduled transactions, for example, 5MW every half hour. However, once a deal is structured and hedged, a certain amount of power required will always remain open - as utilities need to buy or sell power in order to match their customer’s consumption profiles in real-time.
As a result, most utilities are faced with some risk from even their standard business. Below, we have tracked this measure (profit-at-risk) across recent years for 3 different segments of utilities’ typical customers using Monte Carlo simulations.
For the past 3 years, we have tracked the risk from hedging inefficiencies as a result of utilities’ buying and selling residual power in the spot market – which we have defined as “profit at risk” (PaR).
This risk is shown for 3 standard profiles and expressed in €/MWh for easy comparability.
The standard profiles rated below are from 2019 to April 2022. The simulation models were recalibrated monthly to reflect the current market situation and the expected structure was recorded using hourly forward curves (HPFCs).
The easiest way to identify the PaR is to select a quantile. In our study, we chose the 5% quantile – which shows how many €/MWh a utility could lose with a probability of at least 5%.