Reports ETRM in a Low Commodity Price Environment | Page 2

INTRODUCTION
The collapse in wholesale energy prices, which began in earnest mid-year 2014, has resulted in a prolonged
period of declining profits, declining trading volumes, bankruptcies in the up-stream markets, and a general malaise in the global wholesale energy markets. Though low prices are a benefit for consumers, this period has been
extremely challenging for many in the energy industry, particularly those that produce and trade energy commodities.

“Uncertainty is making transparency into and
the management of market, credit and operational risk more imperative, especially as
trading and treasury functions become linked.
This means putting credit exposure and counterparty risk management at the top of their
boardroom agendas.”

Though oil prices have recently begun to rise off their 13
year low set in January of 2016, other energy commodity prices, such as power and natural gas, continue to be moribund –
in a persistent oversupplied condition and with unpredictable
volatilities. Given these conditions, Commodity Technology Advisory, with the support and coordination of study sponsors FIS
and Capco, sought to examine the impact on the usefulness,
utility, and capabilities of Energy Trading and Risk Management (ETRM) systems to improve financial performance and
profitability, mitigate risks, and help find market opportunity for
companies that operate in this difficult market.
This new research looks at the impacts and implications of
low-priced energy commodities as they relate to the key technologies used to trade, manage, value and account for those
trades. These ETRM systems, though vital to the industry, will
vary in their utility and value among users depending on the
scope, scale and age of those systems. While not seeking to
quantify these potential differences, we did want to examine
the implications of the current low price environment on the
value and usefulness market participants assign to those systems and understand the impacts on those technology users
as this low price condition persists.
It is important to note however, that low prices are not the

Dr. Markus Seiser
COO – FIS, energy business
only challenges facing the global and regional energy markets.
Continuing regulatory changes, the influx of renewables energies into many markets (driven in part by support or mandate
of regulators), the developing LNG markets, market structuring/liberalization (particularly in the European power markets)
and many other changes have an impact on wholesale price
formation and on the business strategies of energy market participants.
Given the regional regulatory differences, current and
emerging structural changes, and levels of market maturity between the North American markets and those in Europe, we
will present and analyze the responses from these two regions
both separately and in total in this report.

© Commodity Technology Advisory LLC, 2016, All Rights Reserved.

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