Reports ETRM in a Low Commodity Price Environment | Page 11
ETRM in a Low Commodity Price Environment
that market’s reaction to current conditions.
In particular, the maturity of the gas and power markets
has ensured well-established operational and commercial
practices and rules. Though some regional differences are apparent, particularly in the power markets (ISOs/RTOs), these
are essentially solved problems for market participants. Under
current conditions, the primary concerns focus on ensuring
efficient, profitable operations and less on potential market
upsets or the need for new capabilities to address market or
regulatory changes.
Additionally, the North America region is essentially
self-sufficient in natural gas and power, and the markets for
these commodities are structured to encourage efficient production and distribution of resources. As such, when prices fall,
a significant portion of the market (the producers and affiliated
traders) is immediately impacted and must respond to lower
prices by reducing costs. Without emerging or critical functional deficiencies in their ETRM capabilities, they are more likely
to defer spending on new or upgraded systems.
That being said, the North American markets are not static
and are currently being impacted by new and emerging regulations, subsidization of renewable energy resources, and structural changes as new resources are exploited (shale production) and others abandoned (coal-fired generation). Though
these changes may cause short to mid-term disruptions and
pain for some market players, the constructs of the deregulated markets (liquidity, price visibility, established markets
and exchanges, and common business rules and practices)
do provide for efficient adaptation to change by most industry
participants.
Finally, our respondents generally agree that low energy
prices are a reflection of an oversupplied market. Unfortunately, forecasts of slow global economic growth are an indication
that the current trend will continue for some time. Without increased demand to take up surplus capacity, this period of low
energy commodity prices may be the new normal for several
more years.
Market participants will, by necessity, continue to adapt
to these lower energy prices through budget and/or strategy
adjustments. Given the respondents’ views on their current
systems, possible replacement/enhancement rates and increasing appetite for the cloud to help reduce costs, the survey
seems to suggest that a backlog of work and procurement is
building; but, those new solutions need to be lower cost and
more effective in delivery. The challenge is then with the vendors to deliver functionally-rich and adaptable solutions at the
right price point and with a relatively fast and cost effective
implementation.
© Commodity Technology Advisory LLC, 2016, All Rights Reserved.
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