Why have we introduced Power Nominals?

The power markets badly need comprehensive price discovery.

RisQuant Energy offers a quality, cost effective solution.

The problem. Very few markets exhibit enough forward liquidity to reliably report even one year’s forward curve in the power sector. Furthermore, the power markets are geographically fragmented such that liquid markets are a poor proxy for nearby regions. Even the most liquid markets lack the liquidity necessary to value deferred assets and obligations. Finally, this lack of liquidity has hindered the development of the other measures needed to get a clear view of value and risk anywhere.

Our solution. Our service provides a comprehensive and cost effective solution to this problem. We introduced this service with coverage of twenty markets throughout the midwest and northeastern regions where LMP markets are well developed. We now cover forty-five zones, hubs and interfaces in five ISOs. Only a few of these markets any forward coverage whatsoever. We will be augmenting that coverage by filling in with more locations, adding off peak, and adding regions.

What is Power Nominals? Power Nominals is a service that values on peak electricity for commercially significant zones, hubs and interfaces. Rather than using forward trades, Power Nominals models the expected terminal outcome of a forward trade, along with other useful measures. Power Nominals targets the Day Ahead prices where available, everywhere except ERCOT.

Why would Power Nominals prices differ from the forward? Power Nominals is an inherently risk neutral valuation, while forward prices are often buffetted by fear and greed. Power markets are notoriously opaque. Keep in mind that there are few exchange traded contracts for power.