White Papers Responding To Continual Energy Market Change | Page 4

Responding To Continual Energy Market Change A ComTechAdvisory Whitepaper MASSIVE IMPACTS A significant and growing area of impact has been on European utilities and generators who have been left with essentially ‘stranded’ nuclear and fossil fuel generation facilities to manage. Already, this has begun to have a knock on effect in terms of the structure of the industry with utilities like E.ON hiving off the increasingly unprofitable and unattractive fossil generation side of their business11, for example, while others such as ENEL in Italy, are rapidly shutting down fossil-fuel generation facilities12. Green and renewable power, and to a lesser degree natural gas sourced electric power, have become the focus and are also demanded by consumers. Similarly, the utilities, generators and grid operators have all been faced with the increasing prospect of managing network reliability issues as unpredictable and distributed renewable power inputs increase. This is driving change in industry structure as well as smart grid developments, two-way flow and a new relationship with customers in which the utility might be buying or selling power to/from a customer at any point in time. This is driving research into power storage, which is the missing piece of the puzzle and would help resolve potential grid stability issues. As the cost of renewable energy declines and/or is subsidized, it becomes the default ‘base load’ except that it is extremely variable and unpredictable. As other natural base load generation alternatives such as nuclear and/or coal are removed from the stack, the onus is on natural gas fired generation to plug the gap. This is also problematic for a variety of reasons not least of which is that the EU is and will remain a net importer of natural gas and it is driving gas turbine research and development. nate pricing differentials, power trading and risk management is also changing significantly as volatility and liquidity moves closer in on the forward curve. The emphasis for many firms is increasingly on intra-day and less on forward period trading, driving further significant changes in the industry’s business processes. This has been reflected in the increasing introduction of intra-day trading instruments such as the 15-minute intra-day power products in Germany13, for example. However, the increasing interest and need for intra-day power trading has created many other challenges, such as the need for increased and more timely market data and information; which in itself is coming from a massively increased number of data sources by virtue of transparency regulations now in force. Demand and production must be managed or forecast on an ever shorter-term basis within day and day ahead, requiring systems to manage demand profiles and forecasts, load forecasts, data management and analytics, and increased and more diverse risks. Increasingly, various optimization tools are needed to help manage these activities so that increasing amounts of automation will also be key in the future. In combination with market coupling, which helps to elimi- http://www.theguardian.com/environment/2016/jan/04/eon-completes-split-of-fossil-fuel-and-renewable-operations http://energydesk.greenpeace.org/2015/03/17/enel-commits-coal-investment-phase/ 13 https://www.eex.com/en/products/power 11 12 © Commodity Technology Advisory LLC, 2016, All Rights Reserved.