Energy Trading Fundamentals
A comprehensive, structured curriculum for software engineers, quants, and traders entering UK energy markets. Master the foundations that separate energy trading from other commodity markets.
Why Energy Trading is Different
Unlike equities or currencies, energy markets are governed by physics. You can't store electricity. Gas must flow through pipes. Generators can't be turned on and off instantly. These physical constraints create trading opportunities that pure financial markets never see.
This curriculum teaches you energy trading from first principles. You'll understand the physical infrastructure, the operational constraints, and the financial mathematics that trading firms use to value positions and calculate risk. By the end, you'll know what's happening behind every screen in a modern energy trading operation.
The Curriculum: 5 Core Modules
Physical Foundations of Energy Commodities
Grid balance, merit order dispatch, infrastructure constraints
Why start here: You can't understand energy markets without understanding physics. Learn why electricity supply must match demand within milliseconds, how merit order dispatch works, and why physical constraints create trading opportunities.
The Global Gas Market
LNG shipping, netback pricing, storage arbitrage
Builds on: Physical Foundations taught you why gas plants set marginal power prices. This guide shows you where gas prices come from - the global infrastructure connecting US shale to UK power plants.
Spark Spread & Power Plant Economics
CCGT dispatch decisions, efficiency factors, carbon costs
Builds on: You now understand both sides of the spark spread formula - power prices from merit order (Module 1) and gas prices from global markets (Module 2). Learn to calculate the margin that determines which plants run.
Position Aggregation & Delta Exposure
Portfolio risk calculation, net position management
Builds on: Now that you understand energy products and their economics, learn how traders track what they own. Master position aggregation, the three-key rule, and delta exposure - the foundation every trading system uses.
Mark-to-Market P&L Calculation
Daily valuation, unrealized gains/losses, risk reporting
Builds on: You know your positions (Module 4). Now learn to value them. Calculate unrealized P&L, understand realized vs unrealized gains, and interpret what risk managers watch daily.
What You'll Master
- UK power grid operations - NESO dispatch, balancing mechanism, merit order pricing
- Global gas market dynamics - LNG shipping economics, Henry Hub to NBP pricing lag, storage arbitrage
- Spark spread calculations - CCGT dispatch optimization, efficiency factors, clean dark spreads
- Position management - Signed quantities, three-key aggregation rule, delta exposure, hedge ratios
- P&L calculation - Mark-to-market mechanics, realized vs unrealized, real-time risk monitoring
- Python implementation - Build production-ready calculators and position engines
Who This Is For
Software Engineers
Building ETRM systems, trading platforms, or risk engines? This curriculum teaches you what the business side actually does, so you can build software that solves real problems.
Quants & Analysts
Moving from other markets? Energy trading requires understanding physical constraints that financial models often miss. Learn the domain fundamentals before building sophisticated analytics.
Aspiring Traders
Want to transition into energy trading? This curriculum covers what you'd learn in your first 6 months on a trading desk, taught systematically instead of through trial and error.
Prerequisites
No prior energy market knowledge required. The curriculum starts from first principles.
Helpful background:
- Basic supply/demand economics
- Comfortable with arithmetic and algebra
- Python basics (for implementation sections)
New to energy trading entirely? Start with Energy Trading 101 first.
Time Commitment
Each module includes:
- Main guide: 45-60 minute read
- Full PDF: 15-20 pages with worked examples
- Mastery exercises: 1-2 hours hands-on practice
Total curriculum: ~15 hours to complete all 5 modules with exercises.
Modules build on each other sequentially. Budget 1 week working part-time or 2-3 days full-time.
Related Learning Resources
Physical vs Financial Energy Trading
Understand the crucial difference between trading the physical commodity and trading financial derivatives - and why both matter.
Physical Energy Trading Guide
Deep dive into the messy, constraint-driven reality of moving molecules and electrons for profit across location, time, and quality.
Energy Trading 101
A software engineer's introduction covering the basics: what is energy trading, who are the players, and what role does technology play?
Ready to Master Energy Trading Fundamentals?
Start with Module 1 and progress through the structured curriculum. Each guide builds on the previous, taking you from physical infrastructure to P&L calculation.
Need More Support?
Looking for hands-on training, bespoke software development, or consulting? We offer intensive bootcamps and custom solutions for energy trading teams.