Energy Trading Glossary

Gas and LNG

• Hub — a virtual or physical trading point where gas changes ownership at a published price.
• DES cargo — an LNG cargo delivered ex-ship to a receiving terminal.
• FOB cargo — an LNG cargo sold at the loading terminal, with shipping for the buyer's account.
• Regasification — converting LNG back to gas at an import terminal.
• Send-out — the rate at which a terminal delivers gas into the grid.
• Boil-off — cargo lost to vaporisation during a voyage.
• Diversion — redirecting a cargo to a higher-value market, subject to contract terms.

Power

• Baseload / peakload — delivery across all hours, or across defined higher-demand hours.
• Spark spread — the margin between power price and the gas cost to generate it.
• Dark spread — the equivalent margin for coal-fired generation.
• Balancing — the system operator's mechanism for matching supply and demand in real time.
• Capacity market — payments for available capacity rather than delivered energy.
• PPA — power purchase agreement, often used to underwrite renewable projects.

Environmental products

• Guarantee of origin — a certificate evidencing renewable generation.
• Carbon allowance — a tradable right to emit under a compliance scheme.
• Offset credit — a voluntary market instrument representing an emissions reduction.

Risk

• Basis risk — the residual exposure between the hedge and the physical position.
• Shape risk — exposure created by delivery profile rather than volume.
• Volume risk — exposure to a quantity that is not fixed in advance.
• Credit exposure — the loss if a counterparty fails before settlement.