EURO 2024 Copenhagen
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1442. RISK MANAGEMENT ISSUES IN CURRENT ENERGY CONTEXT

Invited abstract in session WB-63: Risk Management in Private and Public Finance, stream OR in Banking, Finance and Insurance: New Tools for Risk Management.

Wednesday, 10:30-12:00
Room: S14 (building: 101)

Authors (first author is the speaker)

1. Ivan De Crescenzo
La Sapienza Rome University

Abstract

The current macroeconomic context of high interest rates and economic slowdown, both ignited by the gas crisis following the pandemic outbreak, is profoundly impacting the energy sector as well as others. Over the last year, renewables, most likely favoured by a reduced overall demand of power across the continent, have taken over a large share of the market, fostering decarbonization. Gas storage at maximum capacity, almost complete fuel-switch out of coal and decreasing price of carbon allowances seem not to imply profitable margins, with Clean Spark Spread and Clean Dark Spread both looking gloomy. Hence, by contrast, this arrangement is shaping up in nothing but the next trap for utilities.
Particularly, carbon allowances experienced a drastic bearish movement far from being forecast. Over-hedging must be deemed as a possible common scenario many operators are currently navigating. Revenues reductions and variation margins are a threatening combination in this context of lack of liquidity.
Whereas volatility and skyrocketing prices were yesterday’s enemies, stagnation and industrial crisis appear to be the new challenges to tackle in power generation market.

Keywords

Status: accepted

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