Managing Energy Risk: An Integrated View on Power and Other Energy Markets

Preface

Energy utilisation is crucial for modern society and world energy demand is growing constantly. In recent years, public interest in the energy sector has risen sharply with rapidly increasing oil prices, the liberalisation of energy markets, and the first noticeable effects of climate change caused by the burning of fossil fuels. Securing a reliable and sustainable energy supply in light of declining resources and climate change mitigation will be a key challenge of the 21st century.

Until the mid-20th century, energy demand was almost exclusively met by domestic energy sources. Since then, fossil fuels have become traded internationally and for electricity, regional interconnected markets have evolved. Liberalisation of energy markets in many regions of the world has led to new electricity and gas markets and to significantly increased trading volumes. With the introduction of emissions trading for sulphur dioxide (SO₂) in the United States and for carbon dioxide (CO₂) in Europe, completely new markets with highly specific characteristics have been created. These markets for fossil fuels, electricity, and emission allowances improve macroeconomic effciency with respect to the utilisation of limited resources. However, to achieve effciency at an international level, fair market rules not biased by national or other political interests have to be established and maintained.

Besides the energy companies and besides large consumers and emitters, banks and other speculative ...