Sunday, August 17, 2014

When temperatures soar so do profits for energy traders

                                                    Scientific American graphic
When summer temperatures soar, air conditioners get cranked up and so do profits for some who uses clever financial maneuvers tied to supply pressure on the electric grid.
 
The New York Times reports on how a Virginia-based company named DC Energy made made more than $1.5 million within 48 hours "by cashing in on so-called congestion contracts, complex financial instruments that gain value when the grid becomes overburdened."
 
Times reporters Julie Creswell and Robert Gebeloff write:
"Those profits are a small fraction of the fortune that traders at DC Energy and elsewhere have pocketed because of maneuvers involving the nation’s congested grid. Over the last decade, DC Energy has made about $180 million in New York State alone.
 
"Across the nation, investment funds and major banks are wagering billions on similar trades using computer algorithms and teams of Ph.D.s, as they chase profits in an arcane arena that rarely attracts attention."  
 

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