FIS Blog

2018 Outlook: Key Trends to Watch for European Energy and Commodities Markets

January 12, 2018

To a large degree, 2018 is likely to be a simple continuation of the previous few years, as renewables of all forms continue to gain generation share, coal and other dirty fuels are increasingly phased out, and natural gas continues to make something of a resurgence as a generation fuel. Intraday trading will continue to grow and it will increasingly use robots and automated trading programs. Trading will continue to be more analytical driven and more and more automated. Cross-border trading will be another area of interest and there will be movement on capacity and possible changes in capacity allocation in order to facilitate cross-border trade with the roll out of projects, such as XBID for continuous spot trading.

The trading environment will continue to change also as smaller traders will seek to utilize the infrastructure of larger ones via direct market access. This reduces costs, enhances credit and helps with regulatory issues. Similarly, smaller producers and consumers will increasingly utilize aggregators to market and purchase their power production.

On the regulatory side, it looks like more of the same – i.e., uncertainty – as MiFiD II kicks in in January and firms struggle to reconcile aspects of it and other regulations, with the new EU GDPR regulations due into law in May 2018. GDPR will impact all sides of the industry and as yet, has been largely put on the backburner in an industry that is still digesting the impact of a whole plethora of other regulations.

Interestingly, 2018 could also be the year of significant digitalization as companies across the sector continue to review architectures, technologies, and data in an attempt to increase adaptability and responsiveness. This will likely include initiatives in automation through the value chain using artificial intelligence (AI) and machine learning (ML). Blockchain will continue to be probed and tested and by late 2018 may have finally found some commercial application, while better utilization of data for commercial and operational advantage will be a further focus.

Finally, it can be expected that spending on energy and commodities trading and risk management (ETRM/CTRM) and related software will continue to increase through 2018 with increasing numbers of replacements needed to upgrade to more modern technology architectures and toolsets. Increasingly, ETRM/CTRM will be deployed as a service in the cloud and it will be more modular to keep costs down and to improve effectiveness. Emphasis will be upon optimizing assets and operations for increased profit and competitiveness.

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