A power pricing tool available on Thomson Reuters Eikon boasts a 100% success rate with its recent forecasts, helping traders and risk managers to take much more informed positions.
When 50 percent of Nordic power production comes from hydro sources, it’s vital that accurate forecasting models exist to predict future hydro levels and prices.
That’s why power market methodologies such as SDDP — Stochastic Dual Dynamic Programming — have been created to give additional information to those whose work relies on expectations of current and future hydro supply.
For the past 12 months, the Thomson Reuters Nordic SDDP fundamental power price model has correctly indicated the direction for the delivered price in 100% of the cases.
With the exception of the June 2016 contract, the SDDP model has been on the right side of the market for 15 out of the 16 previous months, since March 2016.
How SDDP makes a difference
SDDP is a hydrothermal dispatch model with a detailed representation of the Nordic power system used for short (front week), medium (month/quarter/year) and long term (until 2040) operation studies.
The model produces a complete power price forecast based on the least-cost stochastic operating policy of the hydrothermal system.
This takes into account hydrological uncertainty, and operational details of hydro and thermal plants, as well as load variation and transmission networks.
Traders, production planners, consumers and others can use this forecast to set a fair price for their assets or to discover arbitrage in the market.
Since March 2012, we have indicated the right direction of the market relative to the actual, realized prices (the hourly spot average for the contract period) in 58.6 percent of the cases.
Calculations per reservoir
This tailor-made model analysis is developed by global provider PSR and calibrated for the Nordic Power market by analysis from Thomson Reuters Power & Carbon Research team to support your decision-making.
The SDDP model, which has been in operation in more than 30 countries, improves the existing SDP methodology used in the Nordics for decades.
By using a lower bound for the future system operating cost, SDDP needs fewer calculations per reservoir, allowing for a more detailed representation of the hydro system by including more reservoirs in the power balance.
Unbiased and transparent results
The Thomson Reuters SDDP model for the Nordics has been delivering unbiased and transparent results targeted at the Nordic power futures since 2008, and the results have been continuously tracked since April 2010.
After a major model revision in 2012, TR SDDP has had an average annual growth rate of approximately 10% (March 2012—June 2017).
The SDDP benchmark is performed by comparing the market price at the time of the last forecast before the delivery period to the delivered price.
The delivered price is the average spot price during the period covered by the contract.
If the model indicates a buy signal and the delivered price is higher than market, the difference between the market price and the delivered price is taken as a profit and vice versa.
The model has given a bullish signal for eight out of the 12 months in the period, and a bearish signal for the remaining 4 months.
With Energy Research & Forecasts on Thomson Reuters Eikon you can take an intelligent view of future pricing levels, with rigorously researched and timely numbers on the key drivers of supply and demand, plus expert analysis.