INTUITBY - Intelligent algorithms to support buyer intuition - FDEF

The project at a glance

Start date:

01 Oct 2020
Duration in months:

36
Funding:

237 550
Principal Investigator(s):

Nils LÖHNDORF

About

The IntuitBuy project is a collaborative research project with ArcelorMittal Energy that is funded via the FNR BRIDGES scheme. ArcelorMittal procures electricity for its energy-intensive production and is interested in signing Power Purchase Agreements (PPAs) to reduce its carbon footprint and hedge against price risk in electricity markets. PPAs are long-term financial contracts for buying electricity from renewable sources. Evaluation and pricing PPAs is difficult, as this entails knowledge of long-term price developments and anticipation of cannibalization effects arising from ongoing renewable roll-outs. To address this problem, the IntuitBuy project will deliver a hybrid model that combines machine learning with a fundamental market model. This will not only solve a number of practical issues inherent with fundamental models but will also require to develop novel theory in the relatively new area of inverse optimization. In a second step, the project will deliver a generative model that simulates the possible evolution of fundamental drivers that effect the formation of the electricity prices. This will empower the company to generate long-term price scenarios and effectively price PPAs based on buyer’s intuition about how market fundamentals might evolve. The project will provide the company with a user-friendly dashboard which allows them to upload data, enter parameters, and run price simulations thus providing buyers with valuable intel for negotiating PPAs. The collaboration with the analytics team of ArcelorMittal Energy will not only help the university gain a deeper understanding of the decision process, its variables, and risk factors, but also allow the company to solve a relevant business problem and develop in-house capabilities that it would have otherwise outsourced to data service providers or consultancies.