What You Will Learn

• Correlation & regression analysis; real option analysis; the Black-Scholes option pricing model; binomial trees; GARCH Models; the measurement of energy price risk; and how to use correlation and regression analysis for maintaining a competitive edge.
• How to minimize price risk through operational design Flexibility; measure forward price volatility and adapt Value-at-Risk concepts (VaR) for the Energy Industry.
• Use actual case studies to examine 1) how Monte Carlo simulation is used to value Demand Response programs; 2) benchmarking techniques used for estimating the incremental cost savings of expanding existing operations; and 3) real-option value of generation assets.

Seminar Agenda

DAY ONE:

• The Basics of Deterministic vs. Probabilistic Thinking in Deregulated Markets (2.0 hours)
• Means vs. Standard Deviations
• Distribution Shapes
• Confidence Intervals
• Probability
• Simulation
• Application: Setting up a Monte Carlo Simulation
• Example 1-Confidence Intervals for Calculating Value at Risk - VaR
• Example 2-Customer Migration Model Estimating Migration out of Standard Offer Service in a Deregulated Retail Electricity Market
• Correlation and Regression Analysis for Maintaining the Competitive Edge (2.0 hours)
• Univariate and Multivariate Analysis
• Hypotheses Testing
• Testing for Equal Means and Variances
• Control Charts
• Application: Benchmarking to Industry Standards
• Example 1-Comparing O&M Expenditure to that of Peer Facilities
• Example 2- Estimating the "Economies of Scale" (marginal cost reduction) Associated with Multiple Unit Generation Facilities
• The Energy Forecasting Toolbox (2 hours)
• Historical Trend Analysis
• Univariate Time Series
• Multivariate Time Series
• Econometric Models
• Bayesian Estimation
• End-Use Models
• Engineering or Process Models
• Optimization
• Network Models
• Simulation
• Game Theory
• Scenarios
• Surveys

DAY TWO:

• Time Series Step-by-Step (2hours)
• Time Plots
• Adjusting for Stationarity
• Logarithmic Transformation
• Differencing
• Correlation and Partial Correlation Functions
• Model Specification and Selection
• ARMA Models
• Estimated Parameters and Standard Errors
• Testing for White Noise
• Heteroskedasticity
• Autocorrelation
• Forecasting Future Values
• Additional Seasonality Considerations
• Example 1-Statistical Reports that everyone can understand
• Introduction to Real Options Analysis (2 hours)
• Details of Option Model Implementation
• Black-Scholes, Binomial Trees, and GARCH Models
• Application: Real Option Valuation
• Example of Valuing The Option of Real-Time Forward Load Reduction
• Estimating Volatility and Uncertainty In Historical Prices
• Measuring Forward Volatility
• Adapting Value-at-Risk (VaR) for the Energy Industry
• Application: Optimal Hedging using Statistical Triggers
• Application: Minimizing Price Risk through Operational Design Flexibility
• Example 1- Valuing Combustion Turbines using Real Options
• Example 2- Valuing Gas Storage using Real Options
• Your Instructor - Houston, New York

Instructor: Kenneth Skinner, Ph. D.

Kenneth Skinner, Ph.D. is Vice President of Risk & Evaluation Products for Integral Analytics, an analytical software and management consulting firm focused on operational, planning, and market research solutions. Dr. Skinner has over 20 years’ experience in evaluation and risk measurement, having worked as an energy consultant with PHB Hagler Bailly and Financial Times (FT) Energy, and as the Derivative Structuring Manager for the retail energy supplier Sempra Energy Solutions.

He has his Ph.D. from Colorado School of Mines, in Mineral Economics, with an emphasis in Operations Research, an MBA from Regis University and his BS in Engineering from Letourneau University.

Dr. Skinner is a nationally recognized expert in economic evaluation and modeling of energy assets including energy storage, distribution and generation, efficiency and demand response, renewable energy alternatives, financial derivatives and structured contracts using net present value, econometric and statistical methods, optimization principles, and real option valuation techniques. Dr. Skinner is currently the technology columnist for Wiley Natural Gas and Electricity Journal and is a noted speaker on energy related topics for organizations such as AESP, IAEE, ACEEE, PLMA, IEPEC, INFORMS, Infocast, EUCI, SNL Energy and PGS Energy Training.