The energy transition is well underway, and the impact of the widespread shift to distributed green energy is seen across all parts of the energy sector as utility providers and their customers endeavour to balance deterministic supply with decarbonisation. Arguably, this is not a transition, which implies a smooth, gradual journey to a well-defined endpoint. Many believe we have begun a radical, disruptive revolution where the endpoint is somewhat nebulous.
Regardless, what’s certain is that we have only just started the journey, and transmission system operators (TSOs), distribution system operators (DSOs), traders or the so-called balance-responsible parties (BRPs), and energy retailers are feeling the impact. However, there is still a long way to go before we see the full effects of distributed renewable energy on the energy system and its various participants. In the US, the Inflation Reduction Act has clarified the scale of investments targeted at distributed assets – in the region of US$1 trillion – and an equivalent scale of investment across Europe will continue over the next few years.
The rise of the prosumer, the growth of EVs, and the electrification of heating mean DSOs and energy retailers have had to adopt innovative digital solutions to satisfy these new use cases and customer expectations. When combined with regulatory demands for reducing settlement periods to 30-minute, 15-minute, and even 5-minute resolution, a tsunami of data is heading towards us. It is already beginning to impact many businesses, and the demand for new digital, automated, and analytics-driven solutions is increasing.
The impact of this distributed generation on TSOs, DSOs, and Retailers is genuine and well-documented. Still, arguably, perhaps the most significant impact so far is being felt by those at the other end of the energy market value chain. The power traders are the route-to-market for generation output volume but are also required to balance this output with consumption. Their challenge is to maximise revenue, minimise risk, and avoid imbalance positions and penalties in an environment rapidly scaling and becoming increasingly complex and volatile.
Where once a trader had to manage a small number of significant, centralised, flexible assets, they now have the unenviable task of managing ever-increasing and more complex portfolios that include less deterministic generation assets, additional asset classes, behind-the-meter generation and storage, and evolving consumption patterns. The need for accurate forecasting of generation output and consumption patterns has become an exacting science. In addition, markets are changing with the introduction of TSO Ancillary services, which will continue to evolve over the coming years. Price volatility has increased, and there has been a significant shift towards intraday trading to balance the network and traders’ portfolios. It’s a massive challenge, and mistakes can be expensive.
We still have a long way to go before deploying distributed renewable energies capable of delivering our complete energy requirements. Still, the tasks power traders are required to perform have now gone beyond the point where the human brain can effectively process these operations using tools such as an Excel spreadsheet, and we have already seen the adoption of bots to help improve short-term trading operations. With increased electrification of heat and transport, the scale of the problem grows exponentially. Even if the data tsunami has not yet arrived, it’s most definitely on its way.
Many larger power trading entities aspire to grow into multiple geographies. Some traditional fossil fuel giants are now transforming to green(ish) power behemoths. Many have the market knowledge within their trading teams to operate in numerous markets. Still, they appreciate they will need new solutions to cope with the enormous data challenge required to work at scale and manage their risk. We are now seeing the adoption of new data models across the EMEA region, with organisations procuring industrial-strength Energy Data Management (EDM) platforms to meet this challenge. These EDM platforms can manage their power trading operations, including time series measurement data, forecasts, schedules, and customer contracts and trades in a single instance. Bringing this data into a single scalable platform enables them to automate and optimise all operational trading activities across multiple geographies and markets and undertake balance management and settlement processes.
At Hansen, we have worked closely with our TSO, DSO, and Retail customers to provide new digital solutions as they evolve to manage their new use cases. Additionally, we are at the forefront of supporting our power trading customers to operate efficiently and helping them adapt to change. To date, this change appears to be more radical than evolutionary. Through continued investment in our EDM platform, we enable organisations to operate at scale and across multiple asset classes and geographies, automating the most complex processes and calculations.
In addition, we have invested heavily in our algorithmic trading solutions, which provide our power trading customers with best-of-breed automated Intraday and Day-Ahead Trading in Nord Pool and EPEX SPOT with access to TSO ancillary services across Europe. Hansen is committed to working with our customers and supporting them through these rapidly changing markets to ensure they can maximise their operations, be as efficient as possible, and meet the challenges of today and in the future driven by the energy transition. Reach out to a Hansen expert to discuss how together we can evolve with the energy transition and trading enhancements of the future.
Jyri Joutsi
Product Manager
Hansen Trade
