Energy derivative market and derivative pricing via simulation

The deregulation of power industry worldwide has delivered the efficiency gains to the society; meanwhile, the intensity of competition has increased uncertainty and risks to market participants. Consequently, market participants are keen to hedge the market risks and maintain a competitive edge in the market; and this is a good explanation to the flourish of electricity derivative market. In this paper, the authors gave a comprehensive review of derivative contract pricing methods and proposed a new framework for energy derivative pricing to suit the needs of a deregulated electricity market

Knowledge management in the energy sector:review and future directions

Purpose – The purpose of this paper is to examine the state of knowledge management (KM) in the energy sector and more broadly, and consider future directions for research and practice. Design/methodology/approach – The paper reviews the literature on KM and the practice of KM as relevant to the energy sector. Findings – There are many examples of good practice in KM in the sector, and some organisations, especially in the oil industry, are seen as leaders in KM practice. However, other organisations have yet to embark on explicit KM initiatives or projects at all. In addition, some parts of the energy sector discuss KM without any reference to the more general KM literature. Originality/value – Although some parts of the energy sector have justifiably earned a good reputation for KM, other parts are completely unaware of the field, as is apparent from the literature. This review helps to raise awareness and guide future work.

Addressing the project implementation challenges in the Saudi Arabian power supply industry: an investigative approach towards improving project delivery

For many decades, the Kingdom of Saudi Arabia has been widely known for being a reliable oil exporter. This fact, however, has not exempted it from facing significant domestic energy challenges. One of the most pressing of these challenges involves bridging the widening electricity supply-demand gap where, currently, the demand is growing at a very fast rate. One crucial means to address this challenge is through delivering power supply projects with maximum efficiency. Project delivery delay, however, is not uncommon in this highly capital-intensive industry, indicating electricity supplies are not coping with the demand increases. To provide a deeper insight into the challenges of project implementation and efficient practice, this research adopts a pragmatic approach by triangulating literature, questionnaires and semi-structured interviews. The research was conducted in the Saudi Arabian power supply industry – Western Operating Area. A total of 105 usable questionnaires were collected, and 28 recorded, semi-structured interviews were conducted, analysed and synthesised to produce a conceptual model of what constitutes the project implementation challenges in the investigated industry. This was achieved by conducting a comprehensive ranking analysis applied to all 58 identified and surveyed factors which, according to project practitioners in the investigated industry, contribute to project delay. 28 of these project delay factors were selected as the "most important" ones. Factor Analysis was employed to structure these 28 most important project delay factors into the following meaningful set of 7 project implementation challenges: Saudi Electricity Company's contractual commitments, Saudi Electricity Company's communication and coordination effectiveness, contractors' project planning and project control effectiveness, consultant-related aspects, manpower challenges and material uncertainties, Saudi Electricity Company's tendering system, and lack of project requirements clarity. The study has implications for industry policy in that it provides a coherent assessment of the key project stakeholders' central problems. From this analysis, pragmatic recommendations are proposed that, if enacted, will minimise the significance of the identified problems on future project outcomes, thus helping to ensure the electricity supply-demand gap is diminished.

A heat metering system for energy management on an industrial site

Faced with a future of rising energy costs there is a need for industry to manage energy more carefully in order to meet its economic objectives. A problem besetting the growth of energy conservation in the UK is that a large proportion of energy consumption is used in a low intensive manner in organisations where they would be responsibility for energy efficiency is spread over a large number of personnel who each see only small energy costs. In relation to this problem in the non-energy intensive industrial sector, an application of an energy management technique known as monitoring and targeting (M & T) has been installed at the Whetstone site of the General Electric Company Limited in an attempt to prove it as a means for motivating line management and personnel to save energy. The objective energy saving for which the M & T was devised is very specific. During early energy conservation work at the site there had been a change from continuous to intermittent heating but the maintenance of the strategy was receiving a poor level of commitment from line management and performance was some 5% - 10% less than expected. The M & T is concerned therefore with heat for space heating for which a heat metering system was required. Metering of the site high pressure hot water system posed technical difficulties and expenditure was also limited. This led to a ‘tin-house' design being installed for a price less than the commercial equivalent. The timespan of work to achieve an operational heat metering system was 3 years which meant that energy saving results from the scheme were not observed during the study. If successful the replication potential is the larger non energy intensive sites from which some 30 PT savings could be expected in the UK.

The political shaping of energy technology:combined heat and power in Britain

There has been negligible adoption of combined heat and power (CHP) for district heating (DH) in Britain, despite continued advocacy. This thesis constructs an account of the treatment of the option, and devises a framework for explanation. Analysis of technological development and adoption, it is argued, should be similar to that of other social processes, and be subject to the same requirements and criticisms. They will, however, show features peculiar to the institutions developing and selecting technologies, their relation to different social groups, and the forms of knowledge in and about technology. Conventional approaches - organisation and interorganisation theories, and analyses of policy-making - give useful insights but have common limitations. Elements of an analytical framework situating detailed issues and outcomes in a structured historical context are derived from convergent radical critiques. Thus activity on CHP/DH is essentially shaped by the development and relations of energy sector institutions: central and local government, nationalised industries and particularly the electricity industry. Analysis of them is related to the specific character of the British state. A few CHP and DH installations were tried before 1940. During postwar reconstruction, extensive plans for several cities were abandoned or curtailed. In the 1960s and 70s, many small non-CHP DH schemes were installed on housing estates. From the mid-70s, the national potential of CHP/DH has been reappraised, with widespread support and favourable evaluations, but little practical progress. Significant CHP/DH adoption is shown to have been systematically excluded ultimately by the structure of energy provision; centralised production interests dominate and co-ordination is weak. Marginal economics and political commitment have allowed limited development in exceptional circumstances. Periods of upheaval provided greater opportunity and incentive for CHP/DH but restructuring eventually obstructed it. Explanation of these outcomes is shown to require analysis at several levels, from broad context to detailed action.

The modelling of energy efficient drying for DSM (BL)

This thesis investigates the modelling of drying processes for the promotion of market-led Demand Side Management (DSM) as applied to the UK Public Electricity Suppliers. A review of DSM in the electricity supply industry is provided, together with a discussion of the relevant drivers supporting market-led DSM and energy services (ES). The potential opportunities for ES in a fully deregulated energy market are outlined. It is suggested that targeted industrial sector energy efficiency schemes offer significant opportunity for long term customer and supplier benefit. On a process level, industrial drying is highlighted as offering significant scope for the application of energy services. Drying is an energy-intensive process used widely throughout industry. The results of an energy survey suggest that 17.7 per cent of total UK industrial energy use derives from drying processes. Comparison with published work indicates that energy use for drying shows an increasing trend against a background of reducing overall industrial energy use. Airless drying is highlighted as offering potential energy saving and production benefits to industry. To this end, a comprehensive review of the novel airless drying technology and its background theory is made. Advantages and disadvantages of airless operation are defined and the limited market penetration of airless drying is identified, as are the key opportunities for energy saving. Limited literature has been found which details the modelling of energy use for airless drying. A review of drying theory and previous modelling work is made in an attempt to model energy consumption for drying processes. The history of drying models is presented as well as a discussion of the different approaches taken and their relative merits. The viability of deriving energy use from empirical drying data is examined. Adaptive neuro fuzzy inference systems (ANFIS) are successfully applied to the modelling of drying rates for 3 drying technologies, namely convective air, heat pump and airless drying. The ANFIS systems are then integrated into a novel energy services model for the prediction of relative drying times, energy cost and atmospheric carbon dioxide emission levels. The author believes that this work constitutes the first to use fuzzy systems for the modelling of drying performance as an energy services approach to DSM. To gain an insight into the 'real world' use of energy for drying, this thesis presents a unique first-order energy audit of every ceramic sanitaryware manufacturing site in the UK. Previously unknown patterns of energy use are highlighted. Supplementary comments on the timing and use of drying systems are also made. The limitations of such large scope energy surveys are discussed.

Drying processess in the United Kingdom:assessment of industrial energy utilisation and efficiency of drying systems and the modelling of drying characters using neural networks (BL)

Drying is an important unit operation in process industry. Results have suggested that the energy used for drying has increased from 12% in 1978 to 18% of the total energy used in 1990. A literature survey of previous studies regarding overall drying energy consumption has demonstrated that there is little continuity of methods and energy trends could not be established. In the ceramics, timber and paper industrial sectors specific energy consumption and energy trends have been investigated by auditing drying equipment. Ceramic products examined have included tableware, tiles, sanitaryware, electrical ceramics, plasterboard, refractories, bricks and abrasives. Data from industry has shown that drying energy has not varied significantly in the ceramics sector over the last decade, representing about 31% of the total energy consumed. Information from the timber industry has established that radical changes have occurred over the last 20 years, both in terms of equipment and energy utilisation. The energy efficiency of hardwood drying has improved by 15% since the 1970s, although no significant savings have been realised for softwood. A survey estimating the energy efficiency and operating characteristics of 192 paper dryer sections has been conducted. Drying energy was found to increase to nearly 60% of the total energy used in the early 1980s, but has fallen over the last decade, representing 23% of the total in 1993. These results have demonstrated that effective energy saving measures, such as improved pressing and heat recovery, have been successfully implemented since the 1970s. Artificial neural networks have successfully been applied to model process characteristics of microwave and convective drying of paper coated gypsum cove. Parameters modelled have included product moisture loss, core gypsum temperature and quality factors relating to paper burning and bubbling defects. Evaluation of thermal and dielectric properties have highlighted gypsum's heat sensitive characteristics in convective and electromagnetic regimes. Modelling experimental data has shown that the networks were capable of simulating drying process characteristics to a high degree of accuracy. Product weight and temperature were predicted to within 0.5% and 5C of the target data respectively. Furthermore, it was demonstrated that the underlying properties of the data could be predicted through a high level of input noise.

Fixed bed downdraft gasification of paper industry wastes

The two main wastes generated from secondary fibre paper mills are rejects (composed mainly of plastics and fibres) and de-inking sludge, both of which are evolved from the pulping process during paper manufacture. The current practice for the disposal of these wastes is either by land-spreading or land-filling. This work explores the gasification of blends of pre-conditioned rejects and de-inking sludge pellets with mixed wood chips in an Imbert type fixed bed downdraft gasifier with a maximum feeding capacity of 10kg/h. The producer gases evolved would generate combined heat and power (CHP) in an internal combustion engine. The results show that as much as 80wt.% of a brown paper mill's rejects (consisting of 20wt.% mixed plastics and 80wt.% paper fibres) could be successfully gasified in a blend with 20wt.% mixed wood chips. The producer gas composition was 16.24% H, 23.34% CO, 12.71% CO 5.21% CH and 42.49% N (v/v%) with a higher heating value of 7.3MJ/Nm. After the removal of tar and water condensate the producer gas was of sufficient calorific value and flow rate to power a 10kWe gas engine. Some blends using rejects from other mill types were not successful, and the limiting factor was usually the agglomeration of plastics present within the fuel.

Green technologies in the automotive industry

In most of the discussions about environmental issues and policies, transportation is highlighted as one of the main sources of pollutant emissions and energy consumption. The attention given to the automotive industry is understandable in this context due to its size, expansion, presence in our daily lives, and of course its environmental impact. If we scrutinize the “greenness” of car manufacturers we will find issues of concern from the raw material use, production processes, use, and end-of-life of vehicles. The main issues for production are high consumption of energy, raw materials, water and the waste stream, which contains the four substances of concern (cadmium, lead, hexavalent chromium, mercury). In respect of carbon emissions and energy use the use of cars is the main phase of its life-cycle due to the combination of internal combustion engines with fossil fuels. The most recent pressure is aimed at the end-of-life vehicles (ELV). In addition to the pollution from vehicle use, traffic jams and car accidents continue to be part of the downside of a car culture. Landfills sites are becoming scarce and the contamination of soil and aquifers completes the picture.

Effects of rare-earth co-doping on the local structure of rare-earth phosphate glasses using high and low energy X-ray diffraction

Rare-earth co-doping in inorganic materials has a long-held tradition of facilitating highly desirable optoelectronic properties for their application to the laser industry. This study concentrates specifically on rare-earth phosphate glasses, (R2O3)x(R'2O3)y(P2O5)1-(x+y), where (R, R') denotes (Ce, Er) or (La, Nd) co-doping and the total rare-earth composition corresponds to a range between metaphosphate, RP3O9, and ultraphosphate, RP5O14. Thereupon, the effects of rare-earth co-doping on the local structure are assessed at the atomic level. Pair-distribution function analysis of high-energy X-ray diffraction data (Qmax = 28 Å-1) is employed to make this assessment. Results reveal a stark structural invariance to rare-earth co-doping which bears testament to the open-framework and rigid nature of these glasses. A range of desirable attributes of these glasses unfold from this finding; in particular, a structural simplicity that will enable facile molecular engineering of rare-earth phosphate glasses with 'dial-up' lasing properties. When considered together with other factors, this finding also demonstrates additional prospects for these co-doped rare-earth phosphate glasses in nuclear waste storage applications. This study also reveals, for the first time, the ability to distinguish between P-O and PO bonding in these rare-earth phosphate glasses from X-ray diffraction data in a fully quantitative manner. Complementary analysis of high-energy X-ray diffraction data on single rare-earth phosphate glasses of similar rare-earth composition to the co-doped materials is also presented in this context. In a technical sense, all high-energy X-ray diffraction data on these glasses are compared with analogous low-energy diffraction data; their salient differences reveal distinct advantages of high-energy X-ray diffraction data for the study of amorphous materials. © 2013 The Owner Societies.

A fuzzy levelised energy cost method for renewable energy technology assessment

Renewable energy project development is highly complex and success is by no means guaranteed. Decisions are often made with approximate or uncertain information yet the current methods employed by decision-makers do not necessarily accommodate this. Levelised energy costs (LEC) are one such commonly applied measure utilised within the energy industry to assess the viability of potential projects and inform policy. The research proposes a method for achieving this by enhancing the traditional discounting LEC measure with fuzzy set theory. Furthermore, the research develops the fuzzy LEC (F-LEC) methodology to incorporate the cost of financing a project from debt and equity sources. Applied to an example bioenergy project, the research demonstrates the benefit of incorporating fuzziness for project viability, optimal capital structure and key variable sensitivity analysis decision-making. The proposed method contributes by incorporating uncertain and approximate information to the widely utilised LEC measure and by being applicable to a wide range of energy project viability decisions. © 2013 Elsevier Ltd. All rights reserved.

Uses of frontier efficiency methodologies and multi-criteria decision making for performance measurement in the energy sector

Guest editorial Ali Emrouznejad is a Senior Lecturer at the Aston Business School in Birmingham, UK. His areas of research interest include performance measurement and management, efficiency and productivity analysis as well as data mining. He has published widely in various international journals. He is an Associate Editor of IMA Journal of Management Mathematics and Guest Editor to several special issues of journals including Journal of Operational Research Society, Annals of Operations Research, Journal of Medical Systems, and International Journal of Energy Management Sector. He is in the editorial board of several international journals and co-founder of Performance Improvement Management Software. William Ho is a Senior Lecturer at the Aston University Business School. Before joining Aston in 2005, he had worked as a Research Associate in the Department of Industrial and Systems Engineering at the Hong Kong Polytechnic University. His research interests include supply chain management, production and operations management, and operations research. He has published extensively in various international journals like Computers & Operations Research, Engineering Applications of Artificial Intelligence, European Journal of Operational Research, Expert Systems with Applications, International Journal of Production Economics, International Journal of Production Research, Supply Chain Management: An International Journal, and so on. His first authored book was published in 2006. He is an Editorial Board member of the International Journal of Advanced Manufacturing Technology and an Associate Editor of the OR Insight Journal. Currently, he is a Scholar of the Advanced Institute of Management Research. Uses of frontier efficiency methodologies and multi-criteria decision making for performance measurement in the energy sector This special issue aims to focus on holistic, applied research on performance measurement in energy sector management and for publication of relevant applied research to bridge the gap between industry and academia. After a rigorous refereeing process, seven papers were included in this special issue. The volume opens with five data envelopment analysis (DEA)-based papers. Wu et al. apply the DEA-based Malmquist index to evaluate the changes in relative efficiency and the total factor productivity of coal-fired electricity generation of 30 Chinese administrative regions from 1999 to 2007. Factors considered in the model include fuel consumption, labor, capital, sulphur dioxide emissions, and electricity generated. The authors reveal that the east provinces were relatively and technically more efficient, whereas the west provinces had the highest growth rate in the period studied. Ioannis E. Tsolas applies the DEA approach to assess the performance of Greek fossil fuel-fired power stations taking undesirable outputs into consideration, such as carbon dioxide and sulphur dioxide emissions. In addition, the bootstrapping approach is deployed to address the uncertainty surrounding DEA point estimates, and provide bias-corrected estimations and confidence intervals for the point estimates. The author revealed from the sample that the non-lignite-fired stations are on an average more efficient than the lignite-fired stations. Maethee Mekaroonreung and Andrew L. Johnson compare the relative performance of three DEA-based measures, which estimate production frontiers and evaluate the relative efficiency of 113 US petroleum refineries while considering undesirable outputs. Three inputs (capital, energy consumption, and crude oil consumption), two desirable outputs (gasoline and distillate generation), and an undesirable output (toxic release) are considered in the DEA models. The authors discover that refineries in the Rocky Mountain region performed the best, and about 60 percent of oil refineries in the sample could improve their efficiencies further. H. Omrani, A. Azadeh, S. F. Ghaderi, and S. Abdollahzadeh presented an integrated approach, combining DEA, corrected ordinary least squares (COLS), and principal component analysis (PCA) methods, to calculate the relative efficiency scores of 26 Iranian electricity distribution units from 2003 to 2006. Specifically, both DEA and COLS are used to check three internal consistency conditions, whereas PCA is used to verify and validate the final ranking results of either DEA (consistency) or DEA-COLS (non-consistency). Three inputs (network length, transformer capacity, and number of employees) and two outputs (number of customers and total electricity sales) are considered in the model. Virendra Ajodhia applied three DEA-based models to evaluate the relative performance of 20 electricity distribution firms from the UK and the Netherlands. The first model is a traditional DEA model for analyzing cost-only efficiency. The second model includes (inverse) quality by modelling total customer minutes lost as an input data. The third model is based on the idea of using total social costs, including the firm’s private costs and the interruption costs incurred by consumers, as an input. Both energy-delivered and number of consumers are treated as the outputs in the models. After five DEA papers, Stelios Grafakos, Alexandros Flamos, Vlasis Oikonomou, and D. Zevgolis presented a multiple criteria analysis weighting approach to evaluate the energy and climate policy. The proposed approach is akin to the analytic hierarchy process, which consists of pairwise comparisons, consistency verification, and criteria prioritization. In the approach, stakeholders and experts in the energy policy field are incorporated in the evaluation process by providing an interactive mean with verbal, numerical, and visual representation of their preferences. A total of 14 evaluation criteria were considered and classified into four objectives, such as climate change mitigation, energy effectiveness, socioeconomic, and competitiveness and technology. Finally, Borge Hess applied the stochastic frontier analysis approach to analyze the impact of various business strategies, including acquisition, holding structures, and joint ventures, on a firm’s efficiency within a sample of 47 natural gas transmission pipelines in the USA from 1996 to 2005. The author finds that there were no significant changes in the firm’s efficiency by an acquisition, and there is a weak evidence for efficiency improvements caused by the new shareholder. Besides, the author discovers that parent companies appear not to influence a subsidiary’s efficiency positively. In addition, the analysis shows a negative impact of a joint venture on technical efficiency of the pipeline company. To conclude, we are grateful to all the authors for their contribution, and all the reviewers for their constructive comments, which made this special issue possible. We hope that this issue would contribute significantly to performance improvement of the energy sector.

Trigeneration using biomass energy for sustainable development

Purpose: The paper aims to design and prove the concept of micro-industry using trigeneration fuelled by biomass, for sustainable development in rural NW India. Design/methodology/approach: This is being tested at village Malunga, near Jodhpur in Rajasthan. The system components comprise burning of waste biomass for steam generation and its use for power generation, cooling system for fruit ripening and the use of steam for producing distilled water. Site was selected taking into account the local economic and social needs, biomass resources available from agricultural activities, and the presence of a NGO which is competent to facilitate running of the enterprise. The trigeneration system was designed to integrate off-the-shelf equipment for power generation using boilers of approximate total capacity 1 tonne of fuel per hour, and a back-pressure steam turbo-generator (200 kW). Cooling is provided by a vapour absorption machine (VAM). Findings: The financial analysis indicates a payback time of less than two years. Nevertheless, this is sensitive to market fluctuations and availabilities of raw materials. Originality/value: Although comparable trigeneration systems already exist in large food processing industries and in space heating and cooling applications, they have not previously been used for rural micro-industry. The small-scale (1-2 m3/h output) multiple effect distillation (3 effect plus condenser) unit has not previously been deployed at field level. © Emerald Group Publishing Limited.

Making energy service companies (ESCOS) future fit

Energy service companies (ESCOs) are faced with a range of challenges and opportunities associated with the rapidly changing and flexible requirements of energy customers (end users) and rapid improvements in technologies associated with energy and ICT. These opportunities for innovation include better prediction of energy demand, transparency of data to the end user, flexible and time dependent energy pricing and a range of novel finance models. The liberalisation of energy markets across the world has leads to a very small price differential between suppliers on the unit cost of energy. Energy companies are therefore looking to add additional layers of value using service models borrowed from the manufacturing industry. This opens a range of new product and service offerings to energy markets and consumers and has implications for the overall efficiency, utility and price of energy provision.