FIS recently commissioned Commodity Technology Advisory (ComTech) to conduct a study to examine how the current environment of low energy commodity prices have impacted the use, prioritization and ultimately the value of energy trading and risk management (ETRM) applications.
In reviewing the results to date with ComTech, it became very clear that today’s low gas, power and oil prices are indeed impacting the way users view and value their critical energy trading systems. Here are some of the preliminary results.
What’s the greatest challenge for ETRM in this environment?
More than 50 percent of the respondents said their greatest challenge for ETRM is the difficulty of managing their businesses with an existing architecture comprised of disparate systems and the integration required to connect them.
In this price environment, small price movements have a larger impact than in a period of high prices, and margins can move into the red very quickly. Without the ability to consolidate all information in real-time (or near real-time) and in a singular, multi-commodity platform, it’s difficult to make the necessary adjustments in positions that can help ensure that day’s business remains profitable.
Maintaining multiple ETRM systems (one for gas and another for power, for instance) slows the consolidation of data across the enterprise and introduces latency into the business and decision making process.
What ETRM capabilities are most important?
Of the many capabilities that are being measured in the survey, risk reporting was cited as the most important ETRM capability by over 60 percent of respondents.
Again, given thin trading, higher relative volatilities and very tight margins, risk management and risk reporting are clearly a concern for most market players. Other functions such as trading optimization and intra-day trading also ranked very high as the most important ETRM capabilities.
At FIS, we have seen increasing interest in and focus on intra-day trading in the gas and power markets as companies seek to generate additional revenues and profits – particularly as longer term opportunities become more uncertain in this low price environment.
Coming soon: More results and full report
ComTech will release the full report on the study in October. In the meantime, stay tuned for additional insights from FIS in the coming weeks.
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