Energy
DRS compresses energy supply chain credit tenor to RTGS.
DRS perpetual futures.
Hedging energy for end users and generator
Generator;s hedge
End users hedge
Marketer's long hedge
Marketer's short hedge
Generator's speculative positions
The “stack and roll” method poses serious cash flow risks. A firm must have sufficient capital to ensure that it can pay for potentially large derivative losses in the early years, that will be offset by gains in the physical position in future years. This problem is particularly striking since futures-spot price relationships that are beneficial for generators are detrimental to marketers. If both generators and marketers are employing the “stack and roll” method at the same time, one of them will experience gains while the other will experience losses in the early years of the hedge. It was exactly this cash flow problem associated with the “stack and roll” that caused Metallgesellschaft to lose $1.3 billion trying to hedge its oil marketing activities. It is this risk that electricity regulators must be aware of when designing policies to control the use of electric rate derivatives.
https://emp.lbl.gov/publications/primer-electricity-futures-and-other
Sell power, buy gas
https://nworbmot.org/courses/ee-23/ee-5-energy_trading.pdf
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