Reports ETRM in a Low Commodity Price Environment | Page 10

ETRM in a Low Commodity Price Environment

SUMMARY
Certainly, one has to be careful over analyzing survey data,
however the results of this survey do appear to confirm many
of the trends that ComTech has noted elsewhere, including
the rise of the ETRM/CTRM in the Cloud, for example. Essentially, traders see the shifting trends in a lower commodity
price environment and many find their existing systems will
either need to be replaced or enhanced in order to cope with
the changes in markets, to pursue new trade opportunities,
and to keep up with structural changes in the markets. Issues
like integration have long been a source of frustration for users and despite increasing standardization between markets,
local functionality requirements - especially in Europe - continue to plague users.
The difference between North American and European
energy market maturity and structure clearly stands out in
the results. Under guidance from the EU and enhanced by
the German decision on nuclear energy generation, European markets have moved rapidly to embrace renewables. The
rush to renewables has posed a number of challenges for
these markets including,
1/ A
 significant impact on price formation as a result of
subsidies for renewables to the point where wholesale power prices have been halved over the last
several years and some locations have experienced
sustained periods of negative prices,
2/ The rise of renewables, penalization of fossil fuel generation and changes in grid dynamics (including consumers acting at times as generators and the rise of
the Smart Grid), has also impacted the structure of
the industry with utilities hiving off stranded fossil fuel
assets (burdens), a move to more short-term trading
including intra-day and day ahead,
3/ T
 he move to a single market has also changed industry dynamics virtually eliminating location spreads and
making profitable trades harder to find. At the same
time, infrastructure and data issues on the physical
side particularly around capacity for example, have
also created some new opportunities.
These, and other changes, in the European markets

mean that European traders have a different point of view to
North American traders at times. For Europeans, price formation and market liquidity are significantly impacted by the
move to renewables, and other market structural changes,
and this is readily apparent in the data. Furthermore, the rate
of change is such (especially in an environment where there
is much emphasis on new regulations) that,
1/ Europeans are more likely to need to do something to
enha