Our Gas & Power team recently attended the annual E-world trade fair at Essen, where market participants gathered to discuss what’s new and what’s next
This year’s E-world trade fair featured a host of opportunities for discussion around market trends including gas trading and optimisation, the growth of automated power trading, the coming rise of LNG demand in Europe and the market disruption being caused by the renewables sector. We have selected the following as key takeaways from the event.
We saw a marked increase in the setting-up of corporate power purchase agreements (PPA) in 2018. Our expectation that this trend will continue in 2019 was confirmed at E-world, as conversations with major utilities and others made it clear that a large number of companies are looking to incorporate PPAs as part of restructurings or shifts in strategy direction. These efforts are largely being made in response to developments in the clean energy transition or renewables space, as the reduction of government support is driving firms to reduce price-risk exposure. From a trading perspective, PPAs provide liquidity at the back end of the curve in markets prone to price risk.
Clients including power utilities, oil majors and private conglomerates are telling us that they plan to expand their product coverage and/or enter new geographies. Many companies involved in such planning are looking for commercial talent with backgrounds in origination and business development. Our discussions with clients indicate a particular interest in candidates with a firm understanding of the regulatory landscape, knowledge of certain European electricity markets and experience in originating, negotiating and closing various types of PPA.
Rebalancing generation activities
Asset-backed companies are expanding their proprietary trading operations in an effort to rebalance generation activities as their coal and nuclear plants continue to be decommissioned. Companies not backed by physical assets are working to further expand their gas and power options desks, with a focus on intra-day trading.
We are seeing particularly high demand for structured originators with cross-commodity experience who are deal makers and lead generators able to find and exploit opportunities. The expansion of prop-trading desks is driving higher demand for analysts with experience in fundamentals, modelling and programming across various markets including power, gas and emissions. Gas options traders are also in high demand – particularly those with wide-ranging experience in areas including desk build-outs, operations, risk management and the development and trading of spot and forward markets.
Discussions around Blockchain technology and the use of artificial intelligence are now a regular feature at industry events, but the central focus at E-world was the digitalisation of energy trading. While automated trade has been more of a buzz topic in recent years, it is now recognised as a necessity for companies that want to keep a competitive edge. The opportunity to trade intra-day markets through the use of algorithmic systems has never been so attractive, with prompt trading on the rise and activity in the renewables space influencing forward curves. The rise of energy market volatility is happening in parallel with weaker margins, and automated trade is offering firms a cost-efficient path to margin recovery. This trend is yet to translate into markedly higher demand for algorithmic trading talent, but recent activity suggests that companies including the big utilities are on a learning curve when it comes to finding candidates with the right skill sets.