@RISK Aids British Columbia Hydro
in Energy Conservation Efforts
As featured in Risk & Insurance Magazine
British Columbia Hydro is currently asking Canadian regulators for permission to build what would most likely be the last major dam construction project in North America. Risk management issues are more prevalent with big dams than with smaller hydroelectric projects (such as diversion of a portion of a river).
Big dams, according to BC Hydro’s Basil Stumborg, mean “a lot of wear and tear on the equipment with hard ramp ups and downs. But as a power provider, we have to have reliable operations. It is very complex to balance generation with power purchases, at the same time as demand and generating potential.”
As a result, Stumborg adds, “There is a huge incentive for utilities such as BC Hydro to encourage energy conservation. But while the motivation is there, it is often difficult to know whether these ambitious targets can be achieved. We have been using Palisade's risk analysis software @RISK to communicate complex analyses, and have been able to set very aggressive energy conservation goals.”
» Read the full article in Risk & Insurance magazine
» More about @RISK
» More about BC Hydro
Palisade Publishes New Book: Energy Risk Modeling by Professor Roy 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.
A sampling of 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.
- And much more
» Register for a complimentary webcast covering examples from the
book, given by Roy Nersesian
» Read more about Energy Risk Modeling
Palisade Featured in American Metal
The steel and metals industry publication American Metal Market recently published a feature story about the adoption of Enterprise Resource Planning processes in the steel industry. ERP can include risk analysis, and the article covered an example of a Palisade clients using @RISK’s Monte Carlo simulation to model the most cost-effective way to shut down blast furnaces.
Using @RISK the steel mill was able to completely reline a furnace with a total outage of 68 days and nine hours, which was within the company’s extremely aggressive 70-day window. Each day of lost production represented significant losses in revenue, so efficiency was very important.
» Read the full article here
Register for Palisade Risk Conferences in Australia – Session Programs Now Available
Brisbane, August 27, 2013
Perth, August 29, 2013
Attracting nearly 1,000 delegates worldwide so far this year, the Palisade Risk Conferences have become the most important events of the year for quantitative risk and decision analysis. Each event offers real-world case studies from professional users, as well as software training from Palisade experts.
Coming up in August, those in the Asia-Pacific region have the opportunity to explore real-world approaches to risk management problems in construction, engineering, oil and gas, mining, infrastructure, and other fields at the Palisade Risk Conferences in Brisbane and Perth. Hear case studies from companies in these sectors, and benefit from software training and personalized help from Palisade consultants.
» See the program for Brisbane
» See the program for Perth
In November, save time for Palisade’s largest Risk Conference of the year over two days in Las Vegas at the beautiful Mandalay Bay Resort and Casino!
» Learn more about Las Vegas, November 20-21
» 2013 Palisade Risk Conference Series
Upcoming Regional Trainings
Palisade Training Services show you how to apply @RISK and the DecisionTools Suite to real-life problems, maximizing your software investment. All courses include free materials with dozens of example models.
Register today for a training in your area. We will be visiting the following locations in the upcoming months:
» View the full schedule here
@RISK and Rudd Asset Management Help Turn Waste into Energy
The energy market has been shifting in recent years, ushering in an era where so-called wastes are being re-examined, and the desire for energy security and clean/green energy sources is rising. Rudd Asset Management (RAM), an energy consulting company specializing in cost-effective solutions, recently helped a large horse racing and competition complex that wanted to develop “green” policies that made economic sense. By using Palisade’s DecisionTools Suite, RAM determined that converting stall bedding and manure waste into renewable energy was a feasible, cost-effective solution—helping the complex turn a waste-disposal problem into a profit.
RAM’s methodology for evaluating the project included considerations of IRR (internal rate of return), debt coverage ratio, NPV (net present value), and after-tax cash flows. Assumptions were built using data and expert opinion from all stakeholders. Using @RISK’s sensitivity analysis, key value drivers were identified as well. In the end, a financially viable strategy was created. “Palisade’s DecisionTools Suite is a great tool for our process,” says president Mark Rudd. “We help the client make better decisions quicker, using the power of Monte Carlo simulation.”
» Read the full case study
How to Use Geometric Mean and Standard
Deviation for a Lognormal Distribution in @RISK
If you know the desired geometric mean and standard deviation of a lognormal distribution, use RiskLognorm2( ) but set μ to the natural log of the desired geometric mean, and σ to the natural log of the desired geometric standard deviation.
(where X represents the geometric mean and Y the geometric standard deviation)
You can type the function directly in Excel's formula bar, or use @RISK's Define Distribution Window and select Lognorm2 from the Continuous tab. You can then type the LN function right into the boxes in the Define Distribution dialog.
» Further information on defining lognormal distributions
with different parameters
» Download an example illustrating how to define the lognormal
distribution with different parameters
Finding Conditional Value at Risk (CVar) using @RISK
In finance, the value at risk (usually at the 5% level), or VaR, is a well-known concept. It is the 5th percentile of the distribution of a return. In other words, the return will less than or equal to VaR with probability 5%. However, VaR doesn't tell the whole story. How bad could the return be if it happens to fall below the VaR? To answer this question, another meaure, the conditional value at risk, or CVaR, has been developed. It is the conditional mean return, conditioned on the event that the return is below the VaR.
These example models illustrate how to find the VaR and the CVaR for a portfolio of correlated investments. The output is the portfolio return. When the simulation runs and you "browse" this output, you see the distribution of portfolio return. By default, @RISK adds "sliders" at the 5th and 95th percentiles, so the VaR is directly above the left slider.
To find the CVaR, you can use @RISK's Filter tool. While displaying the Browse Results window for the portfolio return, click the Filter button below the graph and create a "percentile" filter with minimum and maximum percentiles 0% and 5%, respectively. This leads to a graph showing only the outcomes where the portfolio return is below its 5th percentile. Then the mean of this conditional distribution is the CVaR. Alternatively, CVaR can be found without an explicit filter by using the RiskTruncateP property function inside the RiskMean function. This averages only the output values that are below the 5th percentile.
The second spreadsheet builds on the previous example by using RISKOptimizer to find the portfolio weights that maximize the conditional value at risk.
» Download the models
Introduction to Monte Carlo Simulation & Risk
Analysis using @RISK and RISKOptimizer
Presented by: Andrew Sich
14 August - 1pm (Eastern Daylight Time)
» Register Now
Energy Risk Modeling as a Teaching Tool, and Overview of Book
Presented by Roy Nersesian
Monmouth University and Columbia University
18 September - 11am EDT (Eastern Daylight Time)
» Register Now
Introduction a l’analyse des Risques et décisions
avec @RISK et DécisionTools Suite (en français)
Présenté par Manuel Carmona
24 septembre, 10h, heure d'été
» Inscrivez-vous maintenant
Introduction to Risk Analysis using
@RISK and the DecisionTools Suite
Presented by Palisade Corporation
26 September - 10am GMT (Greenwich Mean Time) » Register Now
28 November - 10am GMT (Greenwich Mean Time) » Register Now
Einführung zur Risiko- & Entscheidungsanalyse mit
@RISK und der DecisionTools Suite (auf Deutsch)
Präsentiert von: Sascha Stange
15. Oktober 2013
10:00 Uhr (Berlin)
» Jetzt registrieren
Introducción al análisis de riesgo y decisión con
@RISK y DecisiónTools Suite (en español)
Presentado por: Manuel Carmona
29 de octubre - 10:00 (CET)
» Regístrate ahora
Introduction to Risk Registers using @RISK
Presented by: Doug Oldfield
31 October - 10am (GMT)
» Register Now
» See complete Webcast schedule
The Global Leader in Risk
and Decision Analysis
Palisade Corporation is the world’s leading provider of risk and decision analysis software and solutions. Founded in 1984, its products @RISK and the DecisionTools Suite are used by over 95% of the Fortune 100, in nearly every industry around the world. Palisade is headquartered in New York State, and has offices in London, Sydney, Rio de Janeiro, and Tokyo.