class: center, middle, inverse, title-slide # Electricity as a Tradable Asset ### Sim, Min Kyu ### 2019-05-13 --- ## Definition of an **Asset** + Asset: An economic resource that can be used to produce economic values. + Tradable Asset + An asset that has a single or multiple markets where people buy and sell the asset. + ex) Stock, Bond, Bank Account, Petroleum, Natural Gas. + Non-Tradable Asset + An asset that is not tradable in any market. + ex) Human Resources, Private Businesses. --- ## Uniqueness of **Electricity as a tradable asset** + Traditional Financial Asset + Generally very liquid and closely related to monetary value. + ex) Stock, Bond, Bank Account. + Free to enter and exit markets. + Law of one price applies. + A lot of market participants. + Little cost for delivery. + It is believed that the current price contains all available information. + Raw Materials + Used to create something else such as building, equipment, and product. + ex) Iron, Zinc, Petroleum. + Less liquid and less accessible markets. + It costs to deliver and location matters. + Professional market participants. + There can be substitute materials and this affects price mechanism. + **Electricity** + **Tradability depends.** + **Perishable because non-storable.** (may not be 100% true) + **Both Where it is and when it is available matter a lot.** + **A very few market participants.** --- ## Electricity as a tradable asset + Electricity as a social security and welfare + Often even related to national security. + Reliability matters a lot. + Price of Electricity + Influenced by the factors that determine continuosly changing supply and demand. + Supply side: Fuel costs, Construction cost, **weather**, and other fixed costs. + Demand side: Economic activity, **weather**, and special events. + Usually traded in the form of derivatives such as futures, options, and swaps. + Time interval ranges from 5, 15, or 60 minutes. --- ## Korea Power Exchange .pull-left[  ] .pull-right[ - http://kpx.or.kr/eng/index.do2 - http://power.kpx.or.kr/powerinfo_en.php ] --- ## Price Mechanism - Stock  --- ## Price Mechanism - Commodity  --- ## Price Mechanism - Electricity  --- ## Price Mechanism - Oil ```r ORB <- Quandl("OPEC/ORB") ORBxts <- xts(ORB$Value, order.by = ORB$Date) dygraph(ORBxts) %>% dyRangeSelector() ```
<https://acemk.shinyapps.io/Simulation/> --- ## Possible Academic Problems + May benefit operation, planning, and trading. 1. Demand/Supply forecasting + Predicting future supply and demand. + Time-series modeling with seasonality. 2. Price formation process + Demystifying relationship between demand/supply and price. + Microeconomic mechanism that determines price. + May consider multiple agents' interaction in the game theoric perspective. 3. Capacity planning + Plan how much to trade how far prior to the realization of demand and supply. + Traditional financial risk management techniques + Sequential decision making problem 4. Deep neural network approach + On the condition that ample dataset is available... + Recurrent NN (time-series) + Reinforcement Learning (sequential decision making, dynamic programming, Markov decision processes) --- background-image: url('pebble-beach.jpg') background-position: 50% 50% background-size: cover > "This document is generated using R Markdown and xaringan template"