How To Master the ERP Exam in 10 Steps.

  1. Start preparing early, and finish early. I recommend you start reading the original study material at least 6 months before the exam. You may assemble the reading materials from the original publications instead of the GARP package. The material is exactly the same, with the exception that the GARP exam preparation package already has all the relevant chapters and papers bundled. If you do not mind to jump between chapters in a book and organizing published papers yourself, then you can find all the core readings on sites like Amazon or in your library. Make sure you have at least two months before the exam to review and solve practice questions.
  2. Take notes while reading. Instead of simply reading the textbooks you should take notes from the beginning. This will expedite your review process greatly. Memory consolidation only works if the information is repeatedly recalled (active recall), and reading alone will not make you remember the relevant concepts well enough for a challenging certification such as the ERP.
  3. Regularly review what you have learnt. Review your notes, diagrams, earmarked pages etc. every few days or at least every weekend. This will help you keep perspective and reinforce the most salient concepts.
  4. Explain to others what you have learnt. If you can, study together with other ERP candidates. This will make sense once you have read and summarized the core readings. Explain certain concepts to each other, or solve practice questions together. Who would not want to know how exactly nuclear energy works? Explain it to your parents or a patient neighbor. Discussing the concepts will greatly enhance your understanding and performance on exam day.
  5. Solve as many practice questions as possible. In order to drill the concepts, you must stimulate your brain. If it feels difficult, then it works and you are learning something. Try to find as many practice questions for the ERP exam, or if possible, enroll in a class to take a practice exam, such as the realistic ERP practice exam.
  6. Take a day off work before the exam. You should not go into overdrive right before the exam day. Take a day off, sleep enough, take a walk, or go swimming. Go to bed early and rise early. This will help you achieve peak performance during the exam.
  7. Research your exam center. Go there once before the exam, find out where parking is located, if the exam is taking place on a university campus, find out in which building it will be taken. I took the exam at UCLA. The campus is a maze stretching over several city blocks. There were no signs whatsoever. As it was early on a Saturday, there were almost no students around to ask for directions. Make sure you know where you have to be on exam day, and if you have questions, ask GARP early.
  8. Bring your own lunch. On the exam site, there may be a cafeteria, but you should bring your own lunch. You never know what they are serving, it may be crowded and you have to wait in line. Instead, prepare a healthy sandwich, find a quiet place and relax during the lunch break. Make sure you bring a beverage and snacks during the exam, as there is probably no drinking water provided in the exam room. The official statement is that there are no food or drinks allowed in the exam room, but of you quietly place a bottle of water on the floor next to your chair, nobody will complain.
  9. Do not engage in discussions about the curriculum before the exam. Save this for afterwards. The exam will be hard enough. You need all mental power you can muster, and you should not waste any energy discussing last minute questions right before the exam. This is why you should have a study group where all questions are cleared beforehand.
  10. Take it step by step during the exam. Time is usually not an issue. Solve question for question, and if you see something you did not anticipate, do not despair. Make a mark in your exam book on questions you are not certain about, and re-attempt them later. Do not leave any questions blank, always fill in an answer. You can always correct your answer later.

Nuclear Energy In A Nutshell

Just 66 nuclear power plants satisfy the bulk of all the electrical energy need throughout the USA. Together, they produce about 1,000 GW of electricity a year. The complete electricity-generating ability in the world is around 3,500 GW a year. The main dangers from a nuclear reactor are a meltdown of the core and the dispersion of radioactivity when coolant is missing, and the question how to store spent fuel. Nuclear contamination is very dangerous but is actually extremely rare, and when it happens, these accidents are always extremely well publicized.

19.9% of net generation is nuclear. Fission of uranium heats water to produce steam which rotates a turbine. In the nuclear core, material (a moderator, usually water or graphite) can be inserted between the radioactive matter that slows down the fission and cools the reactor. If water is used as that material, the reactor is called a light water reactor. Such a reactor has a 10-mile emergency planning zone. The two types of reactor processes in use are:

  1. Pressurized water reactor (PWR). Heat is removed from the reactor by water flowing in a closed pressurized loop, and then transferred to a second water loop at lower pressure. This loop will boil and produce steam. No radioactivity ever leaves the reactor (unlike in the BWR). PWR is also more thermally efficient than BWR. Most reactors in use today are PWR.
  2. Boiling water reactor (BWR). Water boils in the reactor itself, and the steam goes directly to the turbine generator. Small amounts of radioactivity are introduced into the pipes and turbine.

When nuclear fuel is used up, it can be stored or recycled, which often significantly minimizes the necessity to purchase new uranium and keeps operating cost of the plant down. The fuel that is stored is sealed in glass containers that can be dealt with in the two following ways:

  1. Storage of sealed containers in very deep volcanic seashore ditches where they slowly assimilate again with the core of the earth.
  2. Land storage (granite, volcanic tuff, salt, shale).

Storage of spent fuel poses the following two threats:

  1. Contamination on the surroundings.
  2. Abuse of the material for (illegal) weapons production.

Contrary to public opinion, nuclear fuel used in power plants can never sustain an explosive reaction like a nuclear bomb. This is so because a nuclear reactor contains only a very low concentration of fissionable substance (3.5-5% of U235). In contrast, a nuclear bomb concentrates in excess of 90% of fissionable components which can generate the runaway sequence effect that happens in a nuclear explosion.

Interestingly, nuclear power is a extremely handy and economic form of energy production. It is much cleaner than burning fossil fuel which emits carbon dioxide, along with SOx as well as NOx. A nuclear power plant will create no greenhouse gas. Furthermore, it costs very little to run a nuclear plant (the main cost is building it). In addition to green (totally free) energy, nuclear power plants provide the least expensive source of energy.

What Is The ERP Exam? What To Expect, And How To Prepare For It

The Energy Risk Professional (ERP) is a new professional designation from GARP aimed at risk professionals working in the physical and financial fields of energy. I was actually studying for the CAIA (Chartered Alternative Investment Analyst) and the CFA (Chartered Financial Analyst) when 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. Still, I took the plunge and registered for the November exam in summer of 2010.

Little did I know what I had signed up for: The ERP curriculum stretched over nearly two thousand pages, consisted of over 100 readings different and academic papers, some of them very lengthy. Next to a 60 hour work week, the study material was a mountain of work. Organizing the material, summarizing it, reviewing and practicing for the exam were made even more difficult by the lack of study material and preparation resources, as only one (!) practice exam was available at the time.

The 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 finance part was easy for me, as it covered mainly options, futures, forwards, swaps and little structured derivatives. Energy futures was a different bag altogether, but not too remote from what I already knew.

The physical aspects were much more interesting, 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. I had made a ton of summaries of the original readings, but how should I pack that into my head for the exam? I used a spaced repetition with my summaries in question and answer format, and that was quite effective (but not very efficient, as it ate a lot of time). In retrospect, 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, and are involved with risk management, 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!

How Will the ERP Designation Help Me to Advance My Professional Career?

A common question I get in emails is this one: “I already work in the energy industry. What will the ERP (Energy Risk Professional) designation do for me to advance my career?”

This is an obvious question often heard from energy marketers, energy commodity traders, engineers, and energy risk managers. The ERP designation is not widely known yet, but this may change soon. While the ERP (short for “Energy Risk Professional”) is relatively new, it stands on solid footing endorsed by GARP (the Global Association of Risk Professionals) and API (the American Petroleum Institute). There are approximately 500 ERP charterholders so far (as of 2010), and their number is expected to grow very quickly. The pass rate on the ERP exam has been about 35% in 2010, so this is definitely not a designation that you simply buy by enrolling for the exam. The ERP designation can be gained by passing one exam, held in May and November each year, but this may be amended in the future, just as has been the case lately with the FRM designation (short for Financial Risk Manager, also by GARP), which now spans over two exams. The time to gain the ERP designation is still relatively short with manageable effort, for the time being.

Having passed the ERP exam in the first go, I can say that the material is not too difficult. You should, however, take your exam preparation seriously: Start at least six months before the exam with the required reading material, and finish reading and summarizing the material at least two months prior to the exam, so you have ample time to review all the study materials and take practice exams.

I definitely think the ERP designation will add value to your resume if you work in the energy industry. Even if you work in related financial fields, I would advise you to consider taking the exam. The effort is not as huge as for other designations such as the CFA, CAIA, or FRM, but you will still get an endorsement from GARP and API. If you can show to prospective employers that you are willing to improve your skills, this always sends a positive signal that will differentiate you from the herd. Employers rewards achievers, so be prepared for an improvement of your professional situation upon getting any professional designation.

If you have made the decision to enroll for the ERP exam, I applaud you. This is your first step to excellence in the growing field of energy risk management. I wish you all the best for your exam preparation on the way to becoming an Energy Risk Professional!