The Energy Risk Professional Exam: What It Is, What to Expect, and How to Prepare

The Energy Risk Professional (ERP) is a professional designation from the American Petroleum Institute (API) and the Global Association of Risk Managers (GARP) aimed at risk professionals working in the physical and financial fields of energy. When I studied for other financial designations I became interested in energy risk management. It was intuitive to me to use energy financial instruments for risk management and hedging, but the physical aspects of the energy risk professional designation were not entirely clear to me. I eventually took the plunge and registered for the November exam in summer of 2010.

My main thought behind registering for the exam was that I found energy and risk management of energy extremely interesting and was (still am) sure that this field would grow tremendously in importance soon. All commerce is in some way related to energy, and I am sure that physical and financial energy risk management will soon spread to other business than simply airlines and petroleum refineries, as is the case today. I would not be surprised if there will also be new energy hedging products on the market soon, but this will clearly veer too far off the topic for now.

The ERP curriculum stretches from physical aspects of petroleum (hydrocarbon genesis, refining, transport with tankers, pipelines) over coal and natural gas, to alternative energy such as solar, hydro, wind, and biomass. There is also a segment of nuclear energy, financial trading instruments, valuation of energy transactions, financial disclosure, and laws and regulations. A large part of the material is electricity.

The physical aspects were actually much more interesting to me, as they contained ideas and concepts that were new to me. Even simple truths like the fact that electricity is not storable and what this means for trading electricity derivatives seem trite at first, but when you get into it further, it opens up a whole new universe.

My main challenge was reviewing and learning the study material. Looking back, I spent about 200 hours preparing for the exam, and passed. If this sounds like a lot, it was. There were simply no tools available at the time that I could have used for a shortcut.

If you work in the energy industry, I encourage you to look into the Energy Risk Professional (ERP) from GARP. This designation is new, but I believe it will grow tremendously in importance over the next few years, and has the potential to help you in your career. I wish you all the best for your exam preparation!