Energy: Risks or Uncertainties?
Energy suppliers and consumers face a significant challenge today, directly influencing the solutions that will (or will not) be implemented.
Identifying the risks and uncertainties at play is crucial. Risks may be mitigated. Uncertainties reflect a non-quantifiable situation.
Examples:
Economics and Finance
Risks: high inflation, rising interest rates, default, exchange rate fluctuations.
Uncertainties: political changes, global crises, pandemics, geopolitical conflicts.
Projects and Management
Risks: delivery delays, technical failures, budget overruns.
Uncertainties: changes in scope, new regulations, customer behaviour.
Environment and Climate
Risks: floods, droughts, deforestation.
Uncertainties: long-term effects of climate change, ecosystem response.
Decision Making
In risky environments, we use statistical models.
In uncertain environments, we use scenarios and our own judgement.
Specifically in the energy sector:
* The challenge for managers: which scenario to bet on?
* What technical, financial, and legal issues are currently being considered?
* How to evaluate energy sources from a contracting and management perspective?
* How to conduct a structured decision-making process?
* What are the perceived risks for each source and how to mitigate them?
* What time horizon should be established for contracting the sources?
* What metrics should be used to evaluate the prices of sources offered by the market?