Like many industries, the energy industry has developed an language all of it's own. Brokers and suppliers talk about Duos Charges and Triads and avialabiity, but what to they actually mean?

We've put together what we think is the most complete glossary of energy terms on the net, if you can't find what you're looking for here give us a call and we'll see if we can help you.

C

CADL:

Continuous Acceptance Duration Limit. Duration below which (15 minutes) a bid or offer accepted by NGC in the balancing mechanism is not included in the cash-out price calculation.

Call option:

An option that gives the buyer (holder) the right, but not the obligation, to buy a futures contract (enter into a long futures position) or physical commodity for a specified price within a specified period of time in exchange for a one-time premium payment.  It obligates the seller (writer) of the option to sell the underlying futures contract (enter into a short futures position) or commodity at the designated price, should the option be exercised at that price.

CRC:

Carbon Reduction Commitment. Legislation planned for 2009, which will require all significant energy users (all those owning at least one site with a demand over 600kW) to buy Carbon Allowances and meet agreed targets for carbon reduction. The scheme, currently under consultation has similarities to the EU-ETS, but has much wider applicability.

CV:

Calorific Value. A measure of energy released as heat when a fuel is burned. It may be measured wet (with water vapour) or dry (after the water vapour has been removed). It may also be measured gross or net – gross includes the heat produced when the after vapour is condensed into a liquid, and net does not. Generally, CV is measured gross and dry.

Cap:

A supply contract between a buyer and seller, whereby the buyer is assured that he or she will not have to pay more than a given maximum price. This type of contract and a call option are analogous.

Capacity:

The rated load-carrying capability of electrical equipment such as generators of transmission lines, typically expressed in megawatts or megavoltamperes. (Gas) the rated transportation volume of natural gas pipelines, typically expressed in millions of cubic feet per day.

Capacity factor:

Ratio of the electrical energy produced by a generating unit relative to the electrical energy that could have been produced at continuous full-power operation during the same period.

Capital Cost:

The cost of field development and plant construction and the equipment required for industry operations.

Carbon Trust:

The Carbon Trust is an independent company funded by Government. Its role is to help the UK move to a low carbon economy by helping business and the public sector reduce carbon emissions now and capture the commercial opportunities of low carbon technologies.

Cash out price:

The price charged for imbalance (see system buy/sell price).

CBM:

Coal Bed Methane, the gas derived from coal seams.

CCAs:

Agreements to mitigate climate change impacts linked to concessions under the Climate Change Levy.

CCL:

Climate Change Levy is a charge introduced by the Government on 1 April 2001 on UK non-domestic fuel - the Government’s aim in introducing the levy is to encourage businesses to use less energy, and contribute to the reduction of Carbon Dioxide emissions.  Businesses that are signatories to a Climate Change Agreement can receive a rebate of 80% of the Climate Change levy. Some sources of renewable and efficient energy are awarded Levy Exemption Certificates. These Certificates entitle an energy user to exemption from the CCL.  Energy that is Levy exempt is often referred to as “renewable” or “green”.

CCGT:

Combined Cycle Gas Turbine. An energy-efficient gas turbine system where the first turbine generates electricity from gas produced during fuel combustion.

CDCA:

Central Data Collection Agent (provided by Logica).

Central systems:

These are systems that interface with NETA in providing measures of the imbalances (surpluses and deficits) arising from small differences between the contractual and actual physical positions of the market participants.

CME:

Chicago Mercantile Exchange. Established in 1898 the Chicago Butter and Egg Board, it became incorporated as the CME in 1991. The CME offers futures and options on futures based on indexes of heating degree-days (HDDs) and cooling degree-days (CDDs) for selected population centres and energy hubs with significant weather-related risks throughout the US. These are the first exchange-traded, temperature –related weather derivatives. These contracts are designed to help businesses protect their revenues during times of depressed demand or excessive costs because of unexpected or unfavourable weather conditions.

CHP:

Combined Heat and Power. The production of two forms of energy, such as high- temperature heat and electricity, from the same process. For example, the steam produced from boiling water could be used for industrial heating.

CHPA:

Combined Heat and Power Association.

Circuit Breakers:

An on-load electrical switching device.

Closed circuit cooling:

A closed water circulating cooling loop for removing heat from various sub stations.

CMM:

Coalmine methane, the gas continuously emitted by coal. Electricity generated by burning CMM is not considered to be renewable, but is exempt from the Climate Change Levy.

Carbon Dioxide (CO2):

A colourless, odourless, non-poisonous gas that is a normal part of Earth's atmosphere.  Carbon dioxide is a product of fossil-fuel combustion as well as other processes. It is considered a greenhouse gas as it traps heat (infrared energy) radiated by the Earth into the atmosphere and thereby contributes to the potential for global warming. The global warming potential (GWP) of other greenhouse gases is measured in relation to that of carbon dioxide, which by international scientific convention is assigned a value of one (1).

Carbon Dioxide equivalent:

The amount of carbon dioxide by weight emitted into the atmosphere that would produce the same estimated radiative forcing as a given weight of another radiatively active gas.  Carbon dioxide equivalents are computed by multiplying the weight of the gas being measured (for example, methane) by its estimated global warming potential (which is 21 for methane). Carbon equivalent units; are defined as carbon dioxide equivalents multiplied by the carbon content of carbon dioxide (i.e., 12/44).

Carbon Intensity:

The amount of carbon by weight emitted per unit of energy consumed. A common measure of carbon intensity is weight of carbon per British thermal unit (Btu) of energy.  When there is only one fossil fuel under consideration, the carbon intensity and the emissions coefficient are identical. When there are several fuels, carbon intensity is based on their combined emissions coefficients weighted by their energy consumption levels.

Carbon Sink:

A reservoir that absorbs or takes up released carbon from another part of the carbon cycle. The four sinks, which are regions of the Earth within which carbon behaves in a systematic manner, are the atmosphere, terrestrial biosphere (usually including freshwater systems), oceans, and sediments (including fossil fuels).

Clean Development Mechanism

A Kyoto Protocol program that enables industrialized countries to finance emissions- avoiding projects in developing countries and receive credit for reductions achieved against their own emissions limitation targets.

CER:

Certificate of Emissions Reduction. A unit of Carbon Reduction produced under the CDM which is expected to be accepted under the European Emissions Trading Scheme.  CERs can be used as an alternative to EUAs, but trade a discount reflecting the potential risk that they will not be accepted for settlement.

CIF (cost, insurance, freight)

This term refers to a type of sale in which the buyer of the product agrees to pay a unit price that includes the FOB. value of the product at the point of origin plus all costs of insurance and transportation. This type of a transaction differs from a delivered purchase, in that the buyer accepts the quantity as determined at the loading port (as certified by the Bill of Lading and Quality Report). CIF transactions take place in international waters, so are not subject to any national jurisdiction or taxation.

Climate Change:

A term used to refer to all forms of climatic inconsistency, but especially to significant change from one prevailing climatic condition to another. In some cases, climate change has been used synonymously with the term global warming; scientists, however, tend to use the term in a wider sense inclusive of natural changes in climate, including climatic cooling.

Coal:

A readily combustible black or brownish-black rock whose composition, including inherent moisture, consists of more than 50 percent by weight and more than 70 percent by volume of carbonaceous material. It is formed from plant remains that have been compacted, hardened, chemically altered, and metamorphosed by heat and pressure over geologic time.

Co-firing:

Burning of organic matter with fossil fuels (typically in a coal-fired power station).

Collateral:

An obligation or security linked to another obligation or security to secure its performance.
Commodity 1) A physical good, typically produced in agriculture or mining, that can be the object of a commercial transaction.
2) Any index, rate, security or physical commodity that is or could be the underlying instrument or price determinant of a futures contract or other financial instrument.

 

 

Commodity Future:

A futures contract on a commodity. Unlike financial futures, the prices of commodity futures are determined by supply and demand rather than the cost-of-carry of.  Commodity futures can, therefore, either be in contango (where futures prices are higher than spot prices) or backwardation (where futures are lower than spot prices.)

Commodity Swap:

Commodity swaps enable both producers and consumers to hedge commodity prices.  The consumer is usually a fixed payer and the producer a floating payer. If the floating- rate price of the commodity is higher than the fixed price, the difference is paid by the floating payer, and vice versa. Usually only the payment streams, not the principal, are exchanged, although physical delivery is becoming increasingly common.  Swaps are sometimes done to hedge risks that cannot readily be hedged with futures contracts. This could be a geographical or quality basis risk, or it could arise from the maturity of a transaction.

Consumption energy account

This is the energy account of the trading party to which the contract/trade relates. (In this case it is a consumption account).

Contango:

Term used to describe an energy market in which the anticipated value of the spot price in the future is higher than the current spot price. When a market is in contango, market participants expect the spot price to go up. The reverse situation is described as backwardation.

Contract for Differences

1) A long-term swap agreed bilaterally, generally between generators and electricity supply companies, and referenced to prices in the relevant pool. 2) A short-dated swap agreement used to minimise the basis risk between the daily published Platt’s quote for dated or physical Brent in a specific time window in the future and the forward price quote for a specific month. Settlement of a CFD is based on the published price difference at a designated time.

Conversion Factors:

These depend on the specific gravity of the crude oil. As a general guide: 1 tonne of crude = 7.5 barrels 1 barrel of crude = 5,604 cubic feet of natural gas, 0.996 barrels of gas oil or 1.446 barrels of LPG 1 US barrel = 42 US gallons = 158.978 litres 1 million barrels of crude a day = 50 million tonnes a year 1 megajoule = 947.81 Btu = 238.85 Kcal 1 cubic foot = 0.0283 cubic meters

Correlation:

A measure to the degree to which changes in two variables are related. Correlation ranges between plus one (perfect correlation – the same amount of movements in the same direction) and minus one (perfect negative correlation – the same amount of movement in opposite directions). Like volatility, it can be calculated from historical data, but such calculations are not necessarily good predictors of behaviour.  If the correlation between markets is known, an option position in one market can be offset against another with similar direction and volatility. This is advantageous, because it can circumvent difficult hedging environments and can reduce costs.  Correlation is also important for the pricing of some options, particularly those offering exposure to more than one market variable. The payout of a spread option or a yield curve option is based on the correlation between two underlying markets separated by space, tie or assets, while that of a quanto product will depend on the extent of the relationship between movements in the underlying and movements in the exchange rate.

Counterparty:

A party to a deal or trade.

Crack Spread:

A calculation of the worth of a barrel of crude oil in terms of its refined products, such as gasoline and heating oil. Crack spread may be based on a variety of refinery models and also depend on the type of crude input. They are usually expressed in dollars and cents per barrel of crude.  To illustrate: To calculate the spread, the cents-per-gallon product prices are multiplied by 42 (the number of gallons per barrel) and subtracted from the crude oil price. For example, when heating oil futures cost $0.60 per gallon and Nymex division light, sweet crude oil is priced at $22 a barrel, the heating oil crack spread in dollars per barrel = $0.60 x 42 = £2.50 - $22 = $3.20.

Credit Risk:

Credit risk, or default risk, is the risk that a financial loss will be incurred if counterparty to a (derivatives) transaction does not fulfil its financial obligations in a timely manner. It is therefore a function of the following: the value of the position exposed to default (the credit or credit risk exposure); the proportion of this value that would be recovered in the event of a default; and the probability of default. Credit risk is also used loosely to mean the probability of default, regardless of the value that stands to be lost.

Crude Oil:

A full-ranging hydrocarbon mixture produced from a reservoir after any associated gas has been removed. Among the most commonly traded crudes are the North Sea’s Brent blend, the US’s West Texas Intermediate and Dubai.

Crude Oil Stocks:

Stocks of crude oil and lease condensate held at refineries, in pipelines, at pipeline terminals, and on leases.

Cubic Foot (cf), natural gas:

The amount of natural gas contained at standard temperature and pressure (60 degrees Fahrenheit and 14.73 pounds standard per square inch) in a cube whose edges are one foot long.