Energy commodities are characterised by rigid demand and high price volatility, linked to climate factors, exchange rates, availability of resources etc. At the same time, prices are often set by the authorities, so wholesale energy companies need to create margins carefully by managing the procurement process and selecting appropriate tools to manage the risks associated with the volatility of energy prices. From the conducted literature review, it emerges that few studies focus on managing risks in the energy procurement process, and they do not consider a ‘non-speculative’ point of view. Therefore, the aim of this research is to analyse and evaluate price risks in the procurement process in a large Italian wholesale company supplying power and natural gas. The paper adopts a quantitative approach to risk evaluation based on accounting indicators, considering the firm’s (young) business as a wholesaler and its non-speculative activity. A set of key risk indicators to measure price risk is presented in the results, split into unbalanced risks, modulation risks and risks derived from bilateral contracts. These indicators are applied to the case study, and each kind of risk is prioritised and discussed with the firm’s top management.

Risk management in the energy procurement process: a case study from the Italian context

VERBANO, CHIARA;CREMA, MARIA
2012

Abstract

Energy commodities are characterised by rigid demand and high price volatility, linked to climate factors, exchange rates, availability of resources etc. At the same time, prices are often set by the authorities, so wholesale energy companies need to create margins carefully by managing the procurement process and selecting appropriate tools to manage the risks associated with the volatility of energy prices. From the conducted literature review, it emerges that few studies focus on managing risks in the energy procurement process, and they do not consider a ‘non-speculative’ point of view. Therefore, the aim of this research is to analyse and evaluate price risks in the procurement process in a large Italian wholesale company supplying power and natural gas. The paper adopts a quantitative approach to risk evaluation based on accounting indicators, considering the firm’s (young) business as a wholesaler and its non-speculative activity. A set of key risk indicators to measure price risk is presented in the results, split into unbalanced risks, modulation risks and risks derived from bilateral contracts. These indicators are applied to the case study, and each kind of risk is prioritised and discussed with the firm’s top management.
Managing the Future Supply Chain: Current Concepts and Solutions for Reliability and Robustness
9783844101805
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11577/2510864
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