Power/Emissions/LCFS related trading
Is there anyone out there who trades emissions, solar RECs, or LCFS credits?
There is a very small community out there and wanted to share some ideas. Renewables are exploding but the ability to hedge the revenue streams have not.
Yes. Whats up?
To answer your question of what's up? My non-trite reply would be that in terms of RINs and LCFS hedging, not very much is up.
I see where capital is flowing to: renewable natural gas, renewable diesel, waste-to-value strategies that are monetizing LCFS credits in the California market, storage providers playing volatility and ancillaries. And for a credit investor, as I am, but formerly sat on a trading desk, the dearth of hedging capabilities is surprising.
It seems to me no one, as far as I know, has built the trading desk to help those investing in the "resource revolution" as folks call it, to manage their risk.
Feedback welcome.
Not meant to be "trite" at all.
Guys like Musket and the majors are currently looking to arb the LCFS with transport. Buddy of mine called and he has a refinery he wants me to put solar on so it meets the standard. Given a recent 200 price, everyone is looking for ways to hedge it. Thats the issue. The tenor of the hedge to finance the build out. Majors can do it on book. Mid levels can not.
There are brokers and others who will help hedge RINs. Again the issue is term, governent intervention in rules changes, etc.
RECs? Very few banks will even hedge them. Trying to get a 10 year NJ SREC hedge through the traps is difficult. ICE has at least provided a little transparecy around price, but volumes/ OI across the board have been thin at best.
If you want to lay credit support for the belly of the curve in RECs, it would be very welcome, but you might get blown out on some of the pricier contracts.
Credit packages including LCs to the developers to offset hedges would be invaluable, but maybe too pricey?
Namaste
D.O.U.G.
Hey D.O.U.G.
I know this is stale, but would love to pick your brain on how to move into the industry. Currently an associate in a fixed income sales and trading role at a bank and trying to get up to speed. Do you have some resources, primers, etc. that would help?
Thanks for your consideration.
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