
Keeping the lights on
Power companies need to focus on resilient networks
This year’s Energy Risk USA conference (just finished in Houston) left delegates with plenty of food for thought but, among the discussions of market manipulation, blockchain applications and portfolio management, the issue of resilience was never far from anyone’s mind.
Houston itself, of course, was hit badly by last year’s hurricane season – in particular by Hurricane Harvey, one of the costliest disasters in history, which caused unprecedented flooding across Texas and elsewhere in the region. Others were hit worse. Eight months after Hurricane Maria, 20,000 houses in Puerto Rico are still without power – inept repair efforts backfired in March and April, blacking out large parts of the island again.
The hurricane affected many energy companies directly – notably BP, which wins our Natural gas house of the year award for 2018 – putting their business continuity plans through a new and severe stress test. But resilience should be a concern, even for companies whose wholesale trading operations are not sited in a hurricane track in the middle of a floodplain.
Even if their intensity does not change over time (and the evidence is ambiguous for storms), natural disasters will become steadily more and more damaging – every year sees more buildings and infrastructure built in vulnerable areas. And few entities – even military entities – are ready to function without grid power for more than a few days.
Resilience should be a concern, even for companies whose wholesale trading operations are not sited in a hurricane track in the middle of a floodplain
Energy companies, in particular power companies, need to step up and make their supply and distribution networks far more decentralised and resilient. Fortunately, the technology is now becoming available for them to do so – not only cheap photovoltaic cells and increasingly inexpensive battery storage, but the software needed to manage decentralised power networks with multiple small and intermittent sources of power. Even blockchain could be used to manage the trading of power among decentralised networks of producer/consumers or “prosumers”.
And – another reason for optimism – there are economic incentives for all these developments to be rolled out. Achieving resilience by accident still counts as a win.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Our take
Why EU banks have snubbed revised green finance metric
Banks steer clear of Banking Book Taxonomy Alignment Ratio in droves
Banks seek to advance predictive pricing models
AI and machine learning-based tools could give FX desks the power to forecast currency movements
Getting a handle on model parameters
Mean reversion in rate parameters opens the door to dimensionality reduction
The case for believing in a Bessent put
Money market funds could prove critical in efforts to control 10-year yields
FRTB may bite harder for Europe’s CVA modellers
Farther reach of advanced approach and lighter load on total requirements mean limited takeaways from Canada and Japan’s implementation
Japan, Basel III and the pitfalls of being on time
Capital floor phase-in delay may be least-worst option for JFSA as US and Europe waver
FX traders revel in March Madness
Chaotic Trump policies finally bring diversity to flows – to the delight of market-makers
Market knee-jerks keep VAR models on their toes
With a return to volatility, increased backtesting exceptions show banks’ algos are stretched