By Roy L. Nersesian
Growing out of Roy Nersesian’s energy courses he delivers at the School of International and Public Affairs at Columbia University, Energy Risk Modeling is a new, ground-breaking reference for those looking for simulation, decision trees, and optimization techniques for energy applications. The book is loaded with real-life examples that demonstrate how @RISK, PrecisionTree, and Evolver can be used to make better financial decisions within the oil and gas, electricity, and renewable energy industries. Roy Nersesian’s easy-to-read, step-by-step approach makes his techniques accessible to anyone who uses Microsoft Excel. All examples covered in the book are provided in Excel spreadsheets.
Topics covered include:
- Modeling payoffs of oil drilling using both PrecisionTree and @RISK
- Economic analysis of a Liquefied Natural Gas (LNG) export project where uncertain variables (cost of natural gas extraction, cost of liquefaction, cost of transportation, and the price of LNG in the intended foreign market) are modeled and simulated in @RISK.
- Optimizing an oil refinery to maximize profits and valuing a real option of purchasing a coal-fired plant using Evolver, shown to have a greater predictive efficacy than Excel’s built-in Solver.
- Modeling solar panel and wind turbine power outputs by factoring cloud cover, temperature, time of day, and wind speed, respectively, while optimizing said uncontrollable energy sources with uncontrollable demand to closely match daily energy demand with power generated.
- Projecting hydropower output in terms of percent capacity using rainfall, evaporation, and damn leakage as probabilistic variables.
- Selecting the preferable biofuel project given that one project has both a higher return and higher risk profile than the other.
- Modeling daily electricity demand amidst uncertainty in the deregulation, time of year and day.
- Selecting which kind of energy plant to meet incremental
demand based on modeling of capacity, costs, energy output
of each source, and taxes and capital recovery factor.
- Projecting oil consumption with trend/regression analysis and oil prices under conditions of uncertainty.
- Managing the risk of energy portfolios with swaps, trailing stops, and puts and calls.
- Optimizing the structure of a loan used to finance the development of an oil field where the loan has no recourse to the other parties.
- Designing a royalty, ownership, and tax regime between two
oil companies jointly developing an oil field.
Roy Nersesian is a professor in the School of Business at Monmouth University, and an adjunct professor for the School of International and Public Affairs at Columbia University. Professor Nersesian holds a BS in physics from Rensselaer Polytechnic Institute, followed by 8 years in the U.S. Navy with his last position as Chief Engineer on a Polaris submarine.
He graduated from Harvard Business School with an MBA and worked for a shipping company, a bank in shipping finance, and as a consultant for a ship brokerage firm all before beginning his academic career in 1985. He teaches quantitative analysis and is involved with various research consulting projects.
Professor Nersesian has written several books, including Corporate Financial Risk Management published by Praeger Press, 2004, and Energy in the 21st Century published by M. E. Sharpe, the second edition of which was published in 2010.