Objective: To provide a practical introduction to the hedge market (which includes the market for all larger consumers whether or not they have hedge or fixed-price variable volume contracts), and to techniques and methods for hedging price risk in electricity markets, with an emphasis on developing skills in working with and applying common forms of hedge contract.

Prerequisites: EL0, with ELNP1 also being useful background.  Alternatively, familiarity with key elements of the electricity supply system including the Grid, metering and various types of generation.  Some familiarity with the behaviour of prices from the spot market is also useful.

1. Introduction
   Electricity supply contracts – ‘contracts for differences’, ‘fixed price variable volume’
   Volatility in the electricity spot market
   Sources of risk, correlations between risks
   Attitudes to risk, risk premiums


2. Hedging Electricity
   Derivatives as hedges
   Physical and financial contracts
   Contracts for differences
   Options and swaptions
   Location factor risk
   Location factor hedging


3. The Hedge Market
   The hedge market in New Zealand
   Forward curves
   The role of price forecasts
   Hedge pricing and risk premiums


4. Buying and Selling Hedges
   How supply and hedging arrangements are structured
   The ISDA agreement
   Fair value and hedge accounting


5. Hedging Strategy
   Adjusting for location factors
   Optimum generation with hedges in place
   Timing of hedge transactions
   Building a \"hedge book\"

NB: Course material may vary from the above on the day.

Objective: To provide an understanding of the essential elements of the NZ electricity supply system and wholesale electricity market.

Prerequisites: none

1. Introduction
   Overview
   Electricity power flows and concepts
   Energy conversions and units


2. Industry Structure
   Generation, retail, transmission, distribution, consumers
   Historical perspective on industry structure
   Governing legislation and regulations, the role of government


3. Supply
   Types of generator and basic characteristics, fuels and renewable sources, generation by fuel type
   Fuel use and efficiency of thermal generators
   Heat rate and efficiency
   Conversion from fuel to energy, efficiency curves, cost structures, GT, CCGT, steam turbines


4. Transmission: The Grid
   AC lines and three phase transmission
   The HVDC link
   Losses and line limits


5. Demand
   Total demand for electricity in New Zealand
   Demand growth - history and projections
   Demand profiles - shape and what creates the shape


6. The wholesale spot market
   Role of the System operator
   Offers & Bids
   Market models
   Reserves
   Settlements


7. Electricity markets and their prices
   Understanding historical price patterns and their origin


8. The Retail market
   Pricing and reconciliation


9. The Hedge market
   Understanding Hedge contracts

NB: Electricity market course material may vary from the above on the day

Objective: To provide a working knowledge of nodal dispatch and pricing as it applies to the New Zealand electricity spot market, including simple formulae to apply and the ability to recognise the cause of certain nodal pricing effects.

Prerequisites: EL0.  Alternatively, some familiarity with the electricity spot market including an overview knowledge of the SPD and RMT models, and with the processes and timing of publication of final, and other prices.

1. Market Processes and Models for Dispatch and Pricing
   Dispatch and pricing processes
   Dispatch and pricing models – SPD and RMT
   Dispatch cost function
   Constraints in dispatch and pricing models
   Shadow prices
   Nodal energy prices and reserve prices defined
   Losses and constraints surplus


2. One Node \'Markets\'
   Dispatch and pricing of energy
   Reserves risk offsets
   Dispatch and pricing of reserve
   Dispatch and pricing effects for energy-reserve constrained dispatch
   Dispatch and pricing dominated by reserves


3. Adding Lines and Losses
   Pricing effects of losses in AC and DC lines
   Linear versus quadratic losses
   Contribution of losses to the losses and constraints surplus
   Loss modelling in SPD


4. Congested Networks
   Line limits
   Pricing effects of simple line constraints
   Contribution of constrained lines to the losses and constraints surplus
   \"Spring washer effect\" due to line constraints in loops in the Grid

Note: Only simple arithmetic is used in this course.  Simple examples using a few nodes at most are used to assist learning.  Course material may also vary from the above on the day.