On March 13, 2017, the UD student chapter of the Society for Industrial and Applied Mathematics (SIAM) visited Constellation Energy in the Harbor East section of Baltimore. The visit was hosted by Constellation's Frank Henshaw, Managing Director of Trading, and Ali Ahmadzadeh, Lead Quantitative Analyst. The visit included a tour of Constellation's new energy commodity trading floor marked as the newest and most state-of-the-art in the United States. The visit was organized from the UD side by chapter president Kevin Aiton and faculty advisor Richard Braun.
The meeting started off with Dr. Ahmadzadeh, a Ph.D. in electrical engineering, providing an overview of Constellation and its energy business lines; interestingly, they have the smallest carbon footprint in the industry. The discussion included examples of how Constellation deploys applied mathematical solutions to manage the price risk they face in the energy commodity markets in their effort to manage and increase their gross margin. He also gave examples of the types of knowledge, skills, and abilities Constellation looks for when hiring employees to work at their location and in the quantitative analyst profession. These attributes include a willingness to work in teams, to learn new math and methods, to write code to solve problems, to be creative when necessary to solve problems, and to be able to communicate one's results concisely in non-mathematical terms. This last attribute may be critical for communicating important ideas to management that may only have a short time to make crucial decisions..
Mr. Henshaw explained a great deal behind what happens in the energy industry and in the businesses conducted by Constellation. They plan for energy delivery and trades up to three years ahead, as well as at intervals of months, weeks, days and hours, with different levels of mathematical modeling employed at each interval. The need for sophisticated planning and trading is critical in light of the deregulation of energy supply in the last decade along with the need to give stable pricing to customers of all sizes, from regional to community to individual homes. The challenge comes from the current impossibility of storing electricity for delivery on the commercial scale. This lack of scaled storage ability introduces extreme price volatility as the operators of our electrical grid attempt to maintain an instantaneous balance between supply and demand. This complex and fascinating matching of the competing demands goes on around the clock, every day.
Mr. Henshaw then gave a tour of the state-of-the-art trading floor, which opened in late 2016. Many of the trading desks had 6 to 8 computer monitors, and at least one student expressed the wish to have at least six monitors for their computers like some of the quants and weather people on the trading floor. No shouting was going on; the trades are completed on the internet within electronic energy trading platforms. It was interesting to see the trading floor so quiet knowing that a blizzard was on its way to the Northeast and mid-Atlantic: energy prices were moving up rapidly and natural gas prices were swinging widely. The picture shows the group on an observation deck above the trading floor.
Our
SIAM student chapter was very impressed with the level and breadth of
mathematics needed to solve important problems at Constellation. We were also impressed with the complex
problem-solving and teamwork that are necessary to bring electricity to us
every day.
Written by: S.
E. Cogar and R. J. Braun , March 15, 2017
