Vienna (energate) – Along with the digitalisation of the energy industry, business processes are accelerating. This also impacts trading; the use of automated trading systems is on the rise. In a guest commentary, Wolfgang Eichberger, Head of Research at software vendor VisoTech, evaluates recent developments in this field.
Thank you, you’ve been replaced by artificial intelligence! Currently many trading professionals in the energy industry are afraid of hearing this. Rightly so? One thing is clear: the energy world is going through a period of drastic change. And it’s happening at an uncomfortably fast pace for this traditionally conservative industry. No surprise, because the rapid pace of digitalisation is forcing the industry to accelerate. An industry on speed. This has become incredibly obvious in the energy spot markets. Year after year, EPEX SPOT and Nord Pool are seeing record growth in short-term trading. Meanwhile, energy can be traded just minutes before delivery. Even on the natural gas exchange PEGAS, short-term trading is growing quickly. This is understandable, since gas-fired power plants are currently one of few options to quickly balance out fluctuations in the production of renewable energy.
Yet another issue that short-term trading can alleviate is the continuing drop in prices. Shrinking margins have already rendered countless business plans obsolete. Even newly built fossil-fuel power plants have been shut down, in order to avoid burning money. And to add more fuel to the fire, prices are becoming more volatile. Long-term predictability is a thing of the past.
Algo-Trading Systems Booming
Fortunately, more and more processes can be automated. In short-term markets, algo-trading systems are booming. Already standard in the financial industry, they are experiencing a Renaissance in the energy industry. But take care: the systems aren’t totally compatible. The large number of products and immediacy of delivery puts automated trading on energy exchanges into a class by itself.
New opportunities are emerging, based on intelligent systems that automate complete process chains from data management to trading and scheduling. Up to now, annual costs of a 24×7 trading desk and the associated dispatching can easily add up to seven-figure sums. Software that takes over these tasks costs only a fraction. Suddenly, small service providers, small public utilities and startups can participate in these markets. This is great – why should the big guys have all the fun?
So now back to the original question – will you, the energy trader, still have a job tomorrow? Naturally! Artificial intelligence systems are – as the name implies – only artificially intelligent. These systems first have to be trained, like a little dog. Then they are only as intelligent as the trainer could make them. As.a result, the knowledge of energy traders is more in demand than ever. The new currency of the energy industry is know-how. Or why is there still no Uber or AirBnB for energy trading? Easy: because it’s much more complicated than taxi dispatching or hotel booking. So energy traders are well advised to use their know-how in the trading race and stay a step ahead of the competition.
Commentary published in: energate messenger 02.02.2018; © 2018 energate gmbh.
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