ELECTRICITY MARKETS

Deregulated regions of the electricity grid in North America are operated by independent system operators (ISOs), who are tasked with providing reliable power at the lowest cost to consumers via competition among generators, transmission owners, and load aggregators.  This is accomplished through the administration of financial markets, which establish current and future prices of electricity at thousands of locations on the grid.

Because electricity cannot be stored economically at scale like other commodities, its prices can be quite volatile.  The volatility leads physical participants to hedge exposure and provides profit opportunities for financial participants who understand the fundamentals of the grid.  Financial participants increase liquidity, improve price discovery, and promote competition by arbitraging away inefficiencies, ultimately yielding lower costs for consumers.  PJM, the largest ISO in North America, saves consumers billions of dollars per year through its market-based operations.

WHY ELECTRICITY MARKETS?

Compared to other financial markets, electricity markets have unique characteristics that offer unique opportunities:

Relatively Few Competitors 

Uncorrelated

Structural Inefficiencies

Low Price Visibility 

Specialized Collateral Rules 

For more information, please contact us.