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. 11