PA00TNCC

SUMMARY OF ELECTRICITY
TRADING TRAINING
PROGRAM SELECTION
USAID GOVERNING FOR GROWTH (G4G) IN GEORGIA
6 February 2019
USAID GOVERNING FOR GROWTH IN GEORGIA
This publication
SUMMARY was produced
OF ELECTRICITY for review
TRADING TRAINING by the
PROGRAM United States
SELECTION Agency for International
Development. It was prepared by Deloitte Consulting LLP. The author’s views expressed
in this publication do not necessarily reflect the views of the United States Agency for
International Development or the United States Government.
SUMMARY OF
ELECTRICITY TRADING
TRAINING PROGRAM
SELECTION
USAID GOVERNING FOR GROWTH (G4G) IN
GEORGIA
CONTRACT NUMBER: 2018-010
DELOITTE CONSULTING LLP
USAID | GEORGIA
USAID CONTRACTING OFFICER’S
REPRESENTATIVE: PHILLIP GREENE
AUTHOR(S): ISET POLICY INSTITUTE
ELECTRICITY TRADING MECHANISM: 5420
LANGUAGE: ENGLISH
6 FEBRUARY 2019
DISCLAIMER:
This publication was produced for review by the United States Agency for International
Development. It was prepared by Deloitte Consulting LLP. The author’s views expressed in
this publication do not necessarily reflect the views of the United States Agency for
International Development or the United States Government.
SUMMARY OF ELECTRICITY TRADING TRAINING PROGRAM SELECTION i
DATA
Reviewed by: Giorgi Giorgobiani, Ana Jejelava, Michael Martley
Project Component: Energy Trade Policy Improvement Component
Practice Area: Electricity Trading Mechanism (ETM)
Key Words: Electricity, Trade, Power, Training

SUMMARY OF ELECTRICITY TRADING TRAINING PROGRAM SELECTION ii
ACRONYMS
CER Certified Energy Regulator

ERRA Energy Regulators Regional Association
ETM Electricity Trading Mechanism
EU European Union
EXAA Electricity Training of Energy Exchange Austria
G4G Governing for Growth in Georgia
ISET-PI International School of Economics at Tbilisi State University-Policy Institute
kV Kilo volt
kWh Kilowatt-Hour
NAGP North American Gas and Power Trading and Risk Management Program
UK United Kingdom of Great Britain and Northern Ireland
USAID United States Agency for International Development

SUMMARY OF ELECTRICITY TRADING TRAINING PROGRAM SELECTION iii
CONTENTS
DATA ...................................................................................................................................................... II
ACRONYMS .......................................................................................................................................... III
1. INTRODUCTION ........................................................................................................................... 5
2. SELECTION OF MOST SUITABLE ELECTRICITY TRADING TRAINING PROGRAM ............ 6
ANNEX - SELECTION OF ENERGY TRADING INTERNATIONAL TRAINING PROGRAM

(PRESENTATION) ........................................................................................................................ 8

SUMMARY OF ELECTRICITY TRADING TRAINING PROGRAM SELECTION iv
1. INTRODUCTION
Georgia took a commitment to harmonize its electricity market legislation with the European Union
(EU) Third Energy Package and liberalize the Georgian electricity market according to its accession
protocol with the Energy Community Secretariat. These structural changes are expected to contribute
to a more efficient functioning of the Georgian electricity market and to support its development.
The Georgian electricity market opening has begun. As a first step, recent amendments in the Law of
Georgia on Electricity and Natural Gas mandated 110-35 kilovolt (kV) customers with a monthly
average of 15 million kilowatt hours (kWh) consumption to trade on the wholesale electricity market.
Therefore, Georgian electricity market participants, namely electricity producers and electricity
customers at the wholesale level must acquire tools, knowledge, and skills to conduct modern
electricity trading and risk migration actions, and to optimize their decisions on selling and buying their
electricity in both the local and neighboring electricity markets.
Governing for Growth (G4G) in Georgia has selected the International School of Economics at Tbilisi
State University-Policy Institute (ISET-PI) for the Electricity Trading Mechanism (ETM) Educational
Program Phase I activity under grant agreement RFA#2018-010.
Taking into consideration the above-mentioned issues, this grant activity is designed to provide
participants with the basic tools, knowledge and skills necessary to define optimal selling and buying
strategies and, more generally, to conduct electricity trading and risk-mitigating activities in the
upcoming ETM.
The main output of the activity will be increased human and institutional capacity of the selected
Georgian electricity market stakeholders, supporting a smooth transition to the new market model in
Georgia. Course participants will develop both a theoretical and practical understanding of:
• Economics of competitive markets;
• The structure and the functioning of electricity market supply/demand;
• The specifics of power markets (wholesale and retail level and cross-border trade);
• Network issues in electricity markets from the point of view of congestion management and
capacity allocation;
• The challenges and opportunities associated with trading on a power market;
• The tools and strategies available for trading and for risk-mitigation.
This report summarizes the process and activities performed under the grant agreement’s milestone 1
and 2 – Selection of Energy Trading International Training Program.

SUMMARY OF ELECTRICITY TRADING TRAINING PROGRAM SELECTION 5
2. SELECTION OF MOST SUITABLE ELECTRICITY
TRADING TRAINING PROGRAM
The ISET-PI project team has studied different regions of the world and searched for reputable
(certified) training programs in electricity trading. The regions researched were:
• Western Europe, Eastern Europe, Turkey – 33 programs;
• USA and Canada – 6 programs;
• Austria, Germany, Switzerland, Hungary – 29 programs;
• Asia, New Zealand, Australia – 10 programs.
The project team has identified total of 78 training programs in all regions. After identification of
programs, the team began reviewing program characteristics, main objectives, and content. This part
of the research tried to answer the following questions: (i) Who is delivering the training? (ii) How
reputable is the institution? (iii) What type of certification does the training provide? (iv) Who is it for?
(Who are the participants, what type of job do they find afterwards) (v) What is the duration of the
program? (vi) How much does the program cost? (vii) What is the content of the program? (syllabus).
Due to the high uncertainty about the future structure of the Georgian electricity market it was
impossible to use a training program of a most similar country and adapt it to the Georgian context.
Instead the project team decided to locally develop the curriculum using experience from multiple
training programs for electricity trading. The criteria of selecting these programs were: (i) balance of
theoretical and practical applications; (ii) consistency with the scope of the pilot program
(fundamentals of economic theory and application for participants with wide variety of background
knowledge); (iii) likely relevance in the Georgian context.
From all the above-mentioned programs, the project team shortlisted eight programs. Based on the
information from shortlisted programs, the project team developed a short syllabus for each region
taking into consideration Georgian context and characteristics of planned training. Specifically, each
syllabus was developed for four weeks and eight meetings (24 hours in total). The syllabus was
developed taking into consideration following content requirements:
• Basic information (intro to power markets);
• Simulations;
• Legal framework (market model – in the law, EU Directive);
• Different typologies of contracts (spot, forward - and different types of forward contracts);
• Risk management tools– derivatives.
Based on all this information, the project team developed a presentation for the USAID G4G project to
review the conducted research and choose the most suitable international energy trading training
programs to be the basis for developing the syllabus for Georgia.
After discussion with G4G, the project team finally selected five electricity trading training programs
most suitable for Georgian context and training needs. Specifically, those programs are:
• Essentials of Power Trading (UK) - accredited by the British Accreditation Council;
• Principles of Electricity Markets (ERRA) - Issues ERRA Certified Energy Regulator (CER)
Certificate;
• North American Gas and Power Trading and Risk Management (NAGP) - accredited by the
British Accreditation Council;
• Electricity Training of Energy Exchange Austria (EXAA) – EXXA Certificate;

• Understanding Electricity Markets (Singapore) - Energy Market Company (Singapore’s power
market operator) Certificate;
The final detailed syllabus prepared for Georgia is based on these selected programs. The project
team prepared training materials for the above-mentioned sessions.
• Session 1: From Regulated to a Liberalized Market in Electricity (6h);
• Session 2: Wholesale Market Places and Trading Fundamentals (6h);
• Session 3: Wholesale Market Places and Trading Fundamentals (7h) (continuation);
• Session 4: Risk Management Tools (6h).
Overall, the aim of the program is to teach attendees the following topics:
1. Features and concepts of the deregulated electricity market;
2. European concept of electricity market liberalization;
3. Third EU energy package principles and requirements;
4. Economics of competitive electricity markets;
5. The structure and the functioning of the demand and supply sides of an electricity market;
6. Important terminology and concepts for trading;
7. Difference between types of traders and their roles;
8. How day-ahead markets operate;
9. How cross border trading is conducted;
10. Different types of financial instruments for electricity trade;
11. The specificities of electricity markets (wholesale and retail level and cross-border trade);
12. Network issues in the electricity market from congestion management and capacity allocation
perspective;
13. The challenges and opportunities associated with trading on a power market;
14. What are the major risks encountered when trading on electricity markets and how to manage
and mitigate them?;
15. How to structure profitable power exchange transactions without exposure to price risk;
16. How electricity futures and derivatives are impacting the forward electric power markets.

ANNEX - SELECTION OF ENERGY TRADING
INTERNATIONAL TRAINING PROGRAM
(PRESENTATION)
Grant Title:
“Electricity Trading Mechanism (ETM) Educational Program Phase I”
Selection of Energy Trading International Training Program
Content
• Suggested Training Programs

• Western Europe, Eastern Europe, Turkey
• USA and Canada
• Austria, Germany, Switzerland, Hungary
• Asia, New Zealand, Australia
• Suggested content of syllabus from each region
Suggested Training Programs

(WE, EE, Turkey)
Selected Training Programs From WE, EE, Turkey (1)
Title of certification program Essentials of power trading
Who is delivering it? International faculty of energy
How reputable is it? The company operates since 1991 and delivers
more than 40 training programs, trained 35,000
delegates and more than 120 countries with
certified and high professional trainers
Certification Accredited by the British Accreditation Council

(BAC)
Who is it for? (Who are the participants, what Power traders, analysts, traders, trade support
type of job do they find afterwards) staff and finance and personnel, retail providers,
utilities and government agencies. The course is
designed by the practitioners for practitioners.
Time duration 2-3 days
How much does it cost £2638

Essentials of power trading (IFE): content
Agenda Summary
• Introduction to European Power Markets
• Electricity Value Chain & its Risks
• Existential Threat to the Well-Functioning European Power Market
• Market Coupling & Cross Border Trading
• Electricity Markets: Physical & Financial Trading
• Power Price Dynamics in Europe
• Spot Trading
• Trading
• The Features of Derivatives
• Electricity Forwards, Futures & Swaps: The Basics
• Basics of Electricity Options
• Spread Trading
• Hedging & Trading from a Utilities Perspective
Case Studies and Exercises

• Turmoil in Spanish power market
• How leading European utilities lost half a trillion euros
• Spot market - Producing a sample bid on the spot market for a generator
• Delegates will be divided in groups of 4-5 people and all groups will be given a business
scenario of a utility. They will be asked to identify the risks, the cash flows and the possible
hedging strategy for that utility.
Selected Training Programs From WE,EE, Turkey (2)
Title of certification program Principles of electricity markets
Who is delivering it? ERRA
How reputable is it? The Energy Regulators Regional Association

(ERRA) is a voluntary organization comprising of
independent energy regulatory bodies primarily
from Europe, Asia, Africa, Middle East, South and
North America. ERRA’s main objective is to
increase exchange of information and experience
among its members and to expand access to
energy regulatory experience around the world.
Certification Issues ERRA Certified Energy Regulator (CER)

credits (10 point). In order to In order to receive
the CER certificate, participants should collect at
least 30 credits within 3 years
Who is it for? (Who are the participants, what Power traders, analysts, traders, trade support
type of job do they find afterwards) staff and finance and personnel, retail providers,
utilities and government agencies. The course is
designed by the practitioners for practitioners.
Time duration 5 days
How much does it cost ERRA Full Members EUR 1 130 + 27% VAT;
ERRA Associate Members EUR 1 340 + 27%
VAT;
Non-Member Regulators EUR 1 550 + 27% VAT;
Non-regulators EUR 2 075 + 27% VAT
Principles of electricity markets (ERRA): content
• Opening Address and Introduction of Participants

• Introduction: From regulated to liberalized markets in electricity; Course outline and main
messages
• Case study: Mexico’s power market reform
• Market design for decarbonized electricity markets
• Group Work: Introducing the off-class teamwork assignment for the week*
• Regulation of electricity networks: access rules and pricing
• Tariff Regulation + Exercise
• Case study: Smart Grid Deployment in Italy
• Visit to MAVIR; Functions, tasks and practical operation of the system operator in a liberalized
market
• Electricity supply: Cost structure and decision making in plant operation and investment
• Electricity demand: Usage, profiling and demand response
• Exercise II: Investment Game
• Case Study: Renewable energy: regulatory and market issues
• Wholesale market models: Integrated vs. decentralized markets
• The role of traders and exchanges; Price evolution and price spikes; Risk management; Spot
(day-ahead, real time) and forward markets
• Capacity mechanism and resource adequacy
• Market Power in electricity generation and transmission
• Cross border arrangements and Market Integration

Syllabus Based on Selected Programs
• The syllabus is prepared based on duration of proposed training program

• Training course and syllabus is tailor-made based on the existing electricity market and
planned future reforms in Georgia
• Training program envisages practical exercises and case studies
Syllabus Based on Selected Programs (2 days)
Introduction to European Power Markets

• Current status and future Developments
• Organization of the European power markets
• Main regulatory issues in Europe
• Main features in power important to trading
• Renewables
Cross Border Capacity
• Explicit vs. implicit auctions
• Market coupling vs. market splitting
• What markets are coupled
• Benefits market coupling
Power Markets: Physical and Financial Trading
• Spot and forward trading of power
• Understanding the generation stack
• Operating decisions of a power plant
• Efficiency curves and heat rates
• Forward curves for power and CO2
• Impact of renewable targets on market structure
Existential Threat to the Well-Functioning European Power Market

• Renewables
• Negative prices
• Challenges and changing role utilities
– Misinvestment
– Fukushima aftermath
– shale gas revolution in USA
– grid destabilization
– narrowing peak- off peak spread
• Regulation
– Impact REMIT, EMIR and MiFID II
• Withdrawal large counterparties
Existential Threat to the Well Functioning European Power Market

• Renewables
• Negative prices
• Challenges and changing role utilities
– Misinvestment
– Fukushima aftermath
– shale gas revolution in USA
– grid destabilization
– narrowing peak- off peak spread
• Regulation
– Impact REMIT, EMIR and MiFID II
• Withdrawal large counterparties
Players in the Trading Markets

• Producers
• End users
• Traders
• Brokers
• Financial institutions
Understanding Power Prices
• Non-storability
• Seasonality
• Volatility, spikes
• Mean reversion
•Price drivers:
– Supply and demand
– Weather and others
Spot Trading
• Spot market models
• How to develop a bidding strategy for the power pool
• How the portfolio can be managed
• Practical examples from the perspective of a supply company and from that of a generator
1 Case Study: Spot market – producing a sample bid on the spot market for a generator trading
Spot market – producing a sample bid on the spot market for a generator
• The role of trading: profit opportunities and risk sharing
• The different strategies:
– Hedging
– Arbitrage
– Speculation
• Trading gas, oil and other commodities to improve performance
• Trading power contracts:
– Margin requirements
– Clearing
– Liquidity
– Information advantages
The Features of Derivatives

• What are derivatives?
• History
• Derivatives: good or bad?
Forwards, Futures and Swaps - Understanding the Basics
• Forwards and futures
• Swaps
• Definitions
• Hedging with futures and forwards
• Hedging with swaps
Power Retail Products
• Interaction wholesale and retail markets
• Retail products
– Full service contracts
– Indexed contracts
• Risk premium
• Potential procurements strategies
1 Case Study: Energy Procurement
Risk Management
• Risk vs. Return
• 10 golden risk management rules
• Main power risks:
– Market risk
– Volume risk
– Credit risk
– Operational risk
Hedging and Trading from a Utilities Perspective
• How to manage risk and trade along the value chain
• Customers increasingly expect flexibility
• Trading at utilities level
• Relationship trading-retail-marketing
• Trading products
Case study 3: Delegates will be divided in groups of 4-5 people and all groups will be given a utility
business scenario. They will be asked to identify the risks, the cash flows and the possible hedging
strategy for that utility.

Suggested Training Programs
(USA and Canada)
Selected Training Programs From USA and Canada
Title of certification program Power Trading Fundamentals
Who is delivering it? Energy Management Institute
How reputable is it? EIA recommend courses of EMI
Who is it for? (Who are the participants, what Power and fuel purchasers, analysts, traders,
type of job do they find afterwards) trade support staff, finance and auditing
personnel. Entry-level to intermediate
professionals from: merchant generators, banks,
utilities, power marketers, retail providers, back
office, hedgers, marketers, end-users and
government agencies.
How much does it cost $1995
Power Trading Fundamentals: content
• Why are the power markets the most volatile of all markets?
• What fundamental factors drive the power markets?
• What role does weather play in determining prices?
• What role do fuel prices play in determining prices?
• What are Locational Marginal Prices and why should you care?
• What is the difference between rea- time, day-ahead and forward power prices?
• What trading tools are used in the power markets, and where can participants find liquidity?
• How is power trading books analyzed, and how do risk management best practices apply?
• What is the status of power market de-regulation and where is it headed?
• How do ancillary services, emissions and renewable mandates affect the power markets?

Selected Training Programs from USA and Canada
Title of certification program North American Gas and Power Trading and Risk
Management - NAGP
Who is delivering it? Mennta Energy Solutions (formerly The Oxford

Princeton Programme, Inc.)
How reputable is it? Founded in 1982. Also covers Europe and is

accredited by British Accreditation Council
Who is it for? (Who are the participants, what Energy Traders and Marketers, Energy Analysts
type of job do they find afterwards) Gas and Power Utilities staff, Power and Fuel
purchasing managers, End-users of derivatives in
corporations
Market Risk Managers, Credit Risk Analysts
Risk consultants, Risk and Audit Committee
Members
CFOs and Treasury Managers, Finance
department personnel, Compliance and Internal
Audit
Middle and Back-Office Personnel, Government
agencies
How much does it cost $3200
North American Gas and Power Trading and Risk Management: Content (1)
Overview of Gas and Power Markets (I): Main players, market structure, and drivers
• Overview of the Physical and Financial Gas and Power Markets
• Market Hubs, Exchanges and OTC markets
• Risk dimensions: Price, basis, volume, regulation, weather, operations
• Long or short? Volumetric and Financial Considerations
• How are gas and power bought and sold?
• Gas markets: Supply and demand drivers
• Power markets: Supply and demand drivers
• Case Study: Power and Gas Market response to supply and demand shocks

Overview of Gas and Power Markets (II): Spot Prices, Basis, Forward Curves
• Spot and Forward Prices for Gas and Power
• Forward curve analysis for gas and power markets
• Case study: Forward curves vs. Price Forecasts
• Shaping the forward curve: Bullets, Trading Packages and Shaping Factors
• Dealing with illiquid hubs and long term maturities
• Understanding energy price behavior and its volatility structure
Gas and Power Physical and Financial Instruments (I): Physical Contracts and Linear Instruments
• Physical purchase and sale contracts: Fixed Price, Index Price and Basis Deals
• Main Types of Derivatives: Futures, Forwards, Swaps and Options
• Exchange-based and OTC trading: Futures vs. Forwards. NYMEX ‘look-alike’ Forwards
• Open Interest, Bid-ask Spreads and Volume
• Clearing, collateral and margin issues
• Swaps (Fixed-for-Floating, Index, Swing), Basis Swaps
• Hedging Physical Purchases and Sales with Forward and Swaps
• Case Study: Hedging seasonal production with a Strip of Futures
Gas and Power Physical and Financial Instruments (II) - Options

• Options and Strips of Options
• Using Energy Options: Hedging and Speculation
• Options types and payoffs
• Average Price (Asian) Options
• Understanding optionality and contract components
• Implied price and implied volatility views in option strategies
• Case Study: Gas Hedging with Swaps vs. Options
• Case Study: Daily Options vs. European Options vs. Asian Options
Mark to Market, P/L and Position management

• Front, Middle and Back Office
• Mark to market vs. Mark to Model
• Bid-ask spreads in Gas and Power transactions
• Introducing the Liquidity Dimension
• Setting up reserves for illiquid positions
• Profit and Loss decomposition for a trading book
• Case study: Pricing a Natural Gas swap. Step by step calculations
• Case Study: Assigning liquidity levels to an energy derivatives book
Trading Strategy and Technical Analysis

• Trading Psychology and Technical Analysis
• Line Charts, Bar, and Candlestick Charts
• Identifying Trends, Support, Resistance
• Moving Averages, Oscillators, Divergence and Convergence Indicators
• Integrating Fundamental and Technical Analysis
• Backtesting Trading Models
• Case Study - Elements of a Trading Strategy
Market and liquidity Risk Management (I)
• Market risk measurement and reporting
• Understanding and interpreting “at-Risk” measures:
• Value at Risk, Earnings at Risk (EaR), Cash Flow at Risk (CFaR)
• Sensitivity analysis and Stress Tests
• Market Liquidity vs. Funding Liquidity Risk
Hedging Strategy and Key Risk Indicators (KRI)

• Hedging and Trading Philosophy and Policy
• Tenor and Volume Decisions
• Key dimensions in hedging: Market, Credit, Liquidity, Accounting, Regret
• Common hedging mistakes
• Case study: Alternative hedging programmes: Pros and Cons
• Trading Limits: Stop Loss, VaR/EaR limits, Volumetric and Counterparty Limits
• Risk adjusted performance (RAROC)
Gas and Power Physical and Financial Instruments (III): Physical Assets and Contracts as Real
Options
• Physical Assets as Real Options
• Using basis swaps to fix prices; hedge transportation and transmission
• Pipeline capacity
• Natural Gas Storage and Calendar Spread Strategies
• Optimization based on Intrinsic Value
• Re-optimization
• Monetization of Real Options
Gas and Power Physical and Financial Instruments (IV): Cross-Commodity Instruments and Real
Options
• Hedging Physical Asset and Contractual exposures
• Spark Spreads and Heat Rate Forwards and Options
• Case Study: Generation Assets as real options.
• Case Study: Monetization of the optionality in Generation Assets
Market and Liquidity Risk Management (II)
• Position Management for portfolios with assets, physical contracts and financial instruments
• Exposure Maps and Front-month Equivalent positions
• Overview of main VaR methodologies
• How to Game “at- Risk” limits
• Backtesting market risk models
• Case Study: Analysis of Amaranth’s Natural Gas calendar spread trading strategy
Greeks, Option Strategies and Volatility

• Zero Cost Collars and Three Way Collars
• Extendable and Participating Swaps
• Energy option ‘Greeks’: uses and limitations
• Case Study: Explaining P&L changes with “Greeks”
• Straddles and delta-neutral strategies
• Tips for negotiating with derivatives counterparties
• Common Derivatives Pricing mistakes and how to avoid them.
• Implied volatilities, Volatility skews and volatility surfaces
• Case Study: Bank of Montreal Natural Gas Options Book
Volumetric Risk and Weather derivatives

• Key sources of volume risk in power markets
• Volumetric risk and Operational Risk:
• Unplanned Outage Insurance
• Case study: Hedging storage contracts and operational risk
• Possible problems when hedging physical exposures with financial forwards: Plant outages, Plants
not dispatched.
• Hedging Volumetric Risk: Weather Derivatives and Multiple-trigger contracts
• Prepayment deals and force majeure
Counterparty Risk Analysis

• Key issues in credit risk management for Gas and Power Markets
• ISDA agreements: Netting, Collateral and Credit Triggers
• Other Credit Risk mitigation tools: Prepayments, Letters of Credit, Credit derivatives
• Novation and OTC Clearing
• Market Based Default Probabilities: Bond Markets and Credit Default Swaps
• Current Exposure and Walk Forward Analysis of Credit Exposures
• Credit Exposures and Potential Future Exposure Modeling
Regulatory Risk Management and Compliance (NEW)
• Regulatory risk management and compliance in energy physical and financial trading
• Identifying potential regulatory risk ‘red flags’
• A practical framework for analysis of market manipulation
• Case study: FERC enforcement case against BP for alleged market manipulation
• Proactive compliance monitoring techniques
• Effective exception reporting and intervention
• Case study: FERC market manipulation cases against JP Morgan and Barclays Bank
The syllabus is prepared taking into account the total duration of the course (24 hours) and authors
proposal to have Role Paying Game included in the training course.
Syllabus Based on Selected Programs (week 1)
Session 1: Power system operation and management (day I, 2 Hours)

• How do electric power systems manage to provide electricity continuously with an adequate
quality of service, at an affordable price and with an acceptable environmental impact?
Session 2: Overview of Power Markets: Main players, market structure, and drivers (day II, 4 Hours)

• Economic principles - Generation technologies and marginal costs. Load. Capacity.
• Basic terminology
• Market fundamentals
• Market participants and motivations.
• Market Hubs, Exchanges and OTC markets
• Risk dimensions: Price, basis, volume, regulation, weather, operations.
• How are gas and power bought and sold?
• Supply and demand drivers
Syllabus Based on Selected Programs (Week 2)
Session 3: Overview of Power Markets: Spot Prices, Basis, Forward Curves (day III, 2 Hours)
• Spot and Forward Prices for Power
• Forward curve analysis for gas and power markets
• Understanding energy price behavior and its volatility structure
• Dealing with illiquid hubs and long term maturities
Session 4: Power Trading Fundamentals (day IV, 4 Hours)

• The basics and fundamentals of energy trading
• Why are the power markets the most volatile of all markets?
• What are Locational Marginal Prices and why should you care?
• What is the difference between real-time, day-ahead and forward power prices?
• What trading tools are used in the power markets, and where can participants find liquidity?
• What is the status of power market de-regulation and where is it headed?
• How do ancillary services, emissions and renewable mandates affect the power markets?
Session 5-6: Trading Strategy and Technical Analysis (days V and VI, 6 Hours)
• Trading Psychology and Technical Analysis
• Line Charts, Bar, and Candlestick Charts
• Identifying Trends, Support, Resistance
• Moving Averages, Oscillators, Divergence and Convergence Indicators
• Integrating Fundamental and Technical Analysis
• Back testing Trading Models

Session 7-8: energy trading and risk management instruments (days VII and VIII, 6 Hours)
• Market risk measurement and reporting - What the various energy trading and risk
management instruments, tools and techniques are, and how they work.
• Designing your risk management program, defining your hedge objectives and determining
the appropriate hedge strategies for your company.
• How to define your price/margin exposure.
• How to assess the risk profile of your company and implement a hedge strategy.
• Development of daily marked to market, monitoring and adjusting your hedge strategy.
• Hedging Strategy and Key Risk Indicators
• Role Playing game (This is kind of simulation where the participants are acting like real
traders. The simulation will give possibility to participants to test their skills and knowledge in
“virtual market”. At the same time the game is possibility to assess participants)

Suggested Training programs
Austria, Germany, Switzerland, Hungary
Country Title of Prior Who is How Who is it for? Who are the Duration Certification Costs
certification knowledge delivering reputable participants issued and
program it? is it? legal value
Austria Electricity Not EXAA Highly Newcomers to the Energy buyers and 5 days Confirmation 1 module 700 EUR,
Trading necessary energy sector, traders electricity traders; of
2 modules 1190
Training who want to acquire attendance
Industrial and large EUR,
basic knowledge of the
companies
energy industry or 3 modules 1590
(consumers);
other specialists EUR,
Public institutions
4m 1990 EUR,
(NGO’s, industry
associations, 5m 2350 EUR,
universities, etc.)
all additional
modules - 500 EUR
EU Fundamentals Not EMTRIMA Highly Energy Company Staff Energy Company 2 days Certificate Price online
of Electricity necessary (with EFET) Staff
299.00 EUR
training
(excl. VAT)
Price in class
1490.00 EUR
(excl. VAT)

EXAA training: content
Module 1 Module 4
• From monopoly to the liberalized market • Introduction to stock market trading
• Legal framework • EXAA trading system with online presentation
• Structure and Market Model, Introduction to Clearing, Trading, • Financial clearing and risk management
Pricing and Networks
• Examination for the acquisition of the Exchange Trader Diploma
• Smart metering
• Module 5
Module 2
• Labeling requirements & proof of origin database
• Actors of the balance group model
• Strategic handling of green electricity
• Participation in the Austrian electricity market
• Requirements and opportunities in dealing with the Energy
• Clearing and Settlement Efficiency Act
• Organization and price model of control energy • Block Chain - What does that mean and possible uses in the
Module 3 electricity market of the future?
• Trade and pricing on European energy markets • Smart Grids / Smart Cities / Big Data
• procurement strategies
• Border Capacity Management in Europe
• Solution models for European capacity bottlenecks and ongoing
projects
• Stock markets and regional markets in Europe

ENTRIMA training: content (1)
Module: Liberalization of the Energy Markets

• What is aim of liberalization? What are the consequences? The Module: The trading organization - The role of trading business unit
EU 3rd energy package.
• Interaction between the sales department and trade and
Module: Risk – What is it? between generation and the trading unit.
• Risk and return; risk-reward ratio; risk versus uncertainty; Module: The trading organization - Front, Middle & Back Office
quantification versus qualification of risk.
• Departments and sub-departments within the trading business
Module: Market risk – What is it? unit, and their role.
• Price risk; hedging; market characteristics, such as location, Module: Trading - What is it and how is it organized?
delivery time/period, time to maturity.
• Trading versus procurement and sales; decision making &
Module: Risk management connectivity; trading tools & data.
• Identification of risk, measuring risk and control of risk; Module: Trading - The reasons for concluding transactions
liquidation, insurance and hedging.
• About procurement, sales, balancing, hedging, arbitrage and
Module: Volatility – What is it? speculation. Why is it applied?
• The concept volatility explained; the calculation and the Module: Trading - The order book
interpretation of volatility figures.
• How does trading take place? How are prices set? What orders
Module: Counterparty risk – What is it? are executed? When? How?
• Credit risk and delivery risk; the consequences of hedging for Module: Trading - Order types
market risk and counterparty risk.
• What order types are applied and for what reasons? Market,
Module: Credit risk management limit, all-or-none, iceberg & stop-loss order.
• Clearing; the concept of netting; credit limits; ratings; sleeking;
systemic risk and regulation.
Module: Liquidity & Liquidity risk
• Market liquidity versus funding liquidity; indicators for market
liquidity; position limits.

ENTRIMA training: content (2)
Module: Trading process - Clearing • What is a swap? What types of swaps are available? What is
their purpose? How are swaps settled?
• Central counterparty; clearing house & clearing members; credit
risk; margining & collateralization. Module: Markets & Products - Options
Module: Trading process - Settlement • What is a call or put option? How can these tools be applied?
How does pricing of options take place?
• Physical delivery versus cash settlement; settlement
procedures; examples with calculations. Module: Trading platforms - OTC markets & trading
Module: Trading process - Transaction flow • How can OTC market be characterized? How is OTC trading
organized? What are master agreements?
• Pre-trade, trade and post-trade processes; tasks &
responsibilities of front/middle & back office staff. Module: Trading platforms - Brokerage services
Module: Trading process - ETRM system • What is the role of a broker? What are the differentials between
inter-dealer brokers and broker-dealers?
• The task of energy trading and risk management software; the
users and purposes of the tool. Module: Trading platforms - Exchange trading
Module: Markets & Products - Spot versus Forward • What features does exchange trading have? How is it
organized? What fees are in place for members?
• The difference between spot/prompt and forward/futures
markets, prices and transactions. Module: Trading platforms - Trading screens & platforms
Module: Markets & Products - Derivatives • What details are relevant to traders? What is Trayport, how
does it work and why do traders use it?
• What are derivatives? What are these financial instruments
used for? By whom are these tools applied? Module: Pricing, price drivers & indexation
Module: Markets & Products - Forwards versus Futures • How do prices arise in the market? What factors drive prices?
What is an index? What is it used for?
• What is a forward or futures contract? What are the differential
between those? Contract specs. Module: FX markets & trading
Module: Markets & Products - Contract for difference • Forex exposures of companies; the role of the treasury
department; currency pairs; exchange rates.
• What is a CFD? What are CFDs used for? Where can the
instruments be traded? How are these settled? Module: Accounting - Mark-to-Market
Module: Markets & Products - Swaps
• Bookkeeping; accounting rules; the differences & consequences Module: Terminology - Opening & Closing, Long & Short, Bull &
of M-to-M vs. historical cost accounting Bear
Module: Accounting - Book structure & Internal transfers • What do the concepts of long or short imply? Likewise for
bullish or bearish, or opening or closing.
• How do firms organize in-house trading, between trade and
other business units? Why? At what price? Exam
Module: Terminology - Upstream, midstream & downstream • This is the exam for Fundamentals of Energy Trading & Risk
Management. After passing the exam, you will be able to
• Explanation of the terminology which is related to the value receive your certificate here as well.
chain.

Syllabus Based on Selected Programs // 1st day
Introductory session (6h)

• Functioning of the energy market: technical prerequisites and economic activity
• Historical development (technical & market model) of the energy industry in Georgia
• The energy market today in Georgia: market participants, legal framework, processes,
important terms
• EU requirements – The target energy market
Syllabus Based on Selected Programs // 2nd day
Participating in the Georgian electricity market (4h)

• Technical & administrative requirements for participation
• Relationships between market participants (contracts, financial securities etc)
• Data management, schedule management, procedures, data flow
• Legal requirements (NRA, Ministry)
Regional market (2h)
• Information about the market models of the neighbouring countries (including EPIAS etc)
• Development of cooperation
• Cross-border capacities, auctions etc.
Syllabus Based on Selected Programs // 3rd day
Fundamentals of energy trading (6h)

• Price formation
• Factors influencing prices
• Energy exchanges in Europe
• Types of risk - Risk management
• Volatility
• Liquidity
• Trading – what is it and how it is organised
• Markets and Products (Spot, Futures / Forwards, Futures / Swaps / OTC, Trading)
• Regulation

Syllabus Based on Selected Programs // 4th day
How to trade? (4h)

• Legal, financial, contractual & technical requirements
• The trading organisation within your company
• Forecasting
SIMULATION – Trading simulation
• Wrap up & Preparation for the EXAM (1,5h)
• EXAM(30 min)
Suggested Training Programs (Asia, New Zealand, Australia)
Selected Training Programs From Asia, New Zealand, Australia
1 2
Title of certification program Understanding Electricity Markets in Focus: Electricity

Markets Financial Markets
Who is delivering it? Energy Market Company (EMC) Australian Financial Markets
Association
How reputable is it? Energy markets company Pte Leading financial markets
LTED operates Singapore’s association
electricity market.
Who is it for? (Who are the Anyone who is interested in The training is aimed at those in
participants, what type of job taking an in-depth look at how frontline electricity financial
do they find afterwards) electricity markets work in both markets roles seeking to further
theory and practice. development their professional
competence in the techniques
Executives and managers from
available for analyzing
the electricity, energy, legal and
derivatives and trading
banking sectors as well as
strategies in the electricity
government officials, regulators
financial markets
and consultants.
Time duration 2 days 1 day (6.5 hours)
How much does it cost

$2,050 $1,584

Understanding Electricity Markets (Singapore) - Day 1
Session 1 – Understanding Electricity

 The physical aspects of generating electricity
 Key features of generation
 Key features of demand
 Key features of transmission
 Role of the system operator
Session 2 - Why Reform and Regulation is Essential in the Electricity Industry
 Basic economic concepts relevant to the electricity industry
 How did the industry structure change over time
 What were the goals of reform
 What are the issues that reform needs to deal with
 What is the typical reform process
 Why is regulation still required and how are different parts of the industry regulated
Session 3 - The NEMS and its Unique Features
 Brief introduction to the deregulation process leading to the NEMS
 Governance of the NEMS
 Types of participants and their roles
 Overview of transmission and distribution
 Trading in the NEMS
 Ancillary service procurement in the NEMS
Understanding Electricity Markets (Singapore) - Day 2
Session 4 – Pricing Mechanism and Economic Dispatch

 Overview of the Market Clearing Engine
 Nodal pricing
 Energy, reserve and regulation markets
 Co-optimisation
 Prices observed in the NEMS
Session 5 -Market Settlement & Credit Risk Management
 Overview of the settlement process
 Content of invoices and resolution of disagreement
 Default and suspension
 Risk management through the prudential regime
Session 6 - How Consumers can Influence Electricity Markets
 Retail competition

 Benefits of demand side response
 Retail pricing structures for demand response
 Demand bidding (dispatchable load)
 Interruptible load
Markets in Focus – Electricity Financial Markets (Australia)
 Spot market basics

 How risk arising in the spot market can be managed via the financial markets
 What financial market products can be used
 How the financial market works: deal cycle
 An overview of regulation and compliance in electricity financial markets
The syllabus is prepared taking into account the total duration of the course (24 hours) and author’s
proposal to have Role Paying Game included in the training course.
Syllabus is based on the following principle: each day is split in two sessions (1.5 hours each).
First 3 days of the training are introductory to explain basics of electricity markets. The rest aims to
give some practical skills.
Day 1. Session 1-2

Understanding Electricity
 The physical aspects of generating electricity
 Key features of generation
 Key features of Demand
 Key features of transmission
 Role of the system operator
 Market Game (30 minutes)
Day 2. Session 1-2
Economics of Electricity Market
 Basic economic characteristics of generation
 How electricity supply is formed
 Profit maximization of electricity market
 Basic economics of electricity demand

 Main financial and economic indicators of electricity markets
Day 3. Session 1
How electricity Market is regulated
 What is the need of regulation.
 How different parts of industry are regulated (Generation, transmission, distribution).
 How did the industry structure change over time.
 Session 2
 What is the expected industry structure.
 Roles/responsibilities of different institutions (TSO, Market Regulator etc.)
 How does regulation change for different parts of industry
Day 4. Session 1-2

Electricity Trading and Price Formation
 Trading on electricity market in Georgian context.
 Energy reserve and regulation markets.
 Market clearing.
Day 5. Session 1
Market Settlement
 Overview of the settlement process.
 Session 2
 Electricity Balancing Market.
 How the balancing market determines dispatch of generation.
Day 6. Session 1-2

The wholesale Spot and Ancillary Markets
 The Load Following Ancillary Services (LFAS) market.
 How the balancing market determines dispatch of generation.
 Offers and Bids.
 Reserves and frequency keeping.
 Role of the System Operator in Dispatch.

Day 7. Session 1-2

Overview of physical and Financial markets
 The electricity physical market, including market structure and participants, regulation, spot
market pricing and spot market risk
 The core purpose of electricity financial markets, their structure and participants
Day 8. Session 1-2
Risk Management
 The features of electricity derivatives used to manage the risk experienced by market
participants, and undertake some basic calculations to see how they work.

USAID Governing for Growth (G4G) in Georgia
Deloitte Consulting Overseas Projects LLP
Address: 5 L. Mikeladze Street, Tbilisi
Phone: +995 322 240115 / 16
E-mail: info@g4g.ge

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SUMMARY OF ELECTRICITY

USAID GOVERNING FOR GROWTH (G4G) IN GEORGIA

Project Component: Energy Trade Policy Improvement Component

Practice Area: Electricity Trading Mechanism (ETM)

Key Words: Electricity, Trade, Power, Training

USAID GOVERNING FOR GROWTH IN GEORGIA

CER Certified Energy Regulator

USAID GOVERNING FOR GROWTH IN GEORGIA

ACRONYMS .......................................................................................................................................... III

2. SELECTION OF MOST SUITABLE ELECTRICITY TRADING TRAINING PROGRAM ............ 6

ANNEX - SELECTION OF ENERGY TRADING INTERNATIONAL TRAINING PROGRAM

USAID GOVERNING FOR GROWTH IN GEORGIA

• Economics of competitive markets;

• The structure and the functioning of electricity market supply/demand;

• The challenges and opportunities associated with trading on a power market;

USAID GOVERNING FOR GROWTH IN GEORGIA

USAID GOVERNING FOR GROWTH IN GEORGIA

USAID GOVERNING FOR GROWTH IN GEORGIA

Selection of Energy Trading International Training Program

• Suggested Training Programs

Suggested Training Programs

Selected Training Programs From WE, EE, Turkey (1)

Title of certification program Essentials of power trading

Who is delivering it? International faculty of energy

Certification Accredited by the British Accreditation Council

Time duration 2-3 days

How much does it cost £2638

USAID GOVERNING FOR GROWTH IN GEORGIA

Case Studies and Exercises

Selected Training Programs From WE,EE, Turkey (2)

Title of certification program Principles of electricity markets

Who is delivering it? ERRA

How reputable is it? The Energy Regulators Regional Association

Certification Issues ERRA Certified Energy Regulator (CER)

Time duration 5 days

Principles of electricity markets (ERRA): content

• Opening Address and Introduction of Participants

USAID GOVERNING FOR GROWTH IN GEORGIA

• The syllabus is prepared based on duration of proposed training program

Syllabus Based on Selected Programs (2 days)

Introduction to European Power Markets

Syllabus Based on Selected Programs (2 days)

Existential Threat to the Well-Functioning European Power Market

Syllabus Based on Selected Programs (2 days)

Existential Threat to the Well Functioning European Power Market

Syllabus Based on Selected Programs (2 days)

Players in the Trading Markets

Syllabus Based on Selected Programs (2 days)

Syllabus Based on Selected Programs (2 days)

The Features of Derivatives

1 Case Study: Energy Procurement

Syllabus Based on Selected Programs (2 days)

USAID GOVERNING FOR GROWTH IN GEORGIA

Selected Training Programs From USA and Canada

Title of certification program Power Trading Fundamentals

Who is delivering it? Energy Management Institute

How reputable is it? EIA recommend courses of EMI

Time duration 2 days

How much does it cost $1995