Energy trading technologies: increasing efficiency and resilience in European energy

With geopolitical disruptions, increasingly volatile markets and a pressing need to secure a sustainable energy future, the European energy sector is undergoing profound challenges.

 

And it’s meeting those challenges head-on. To deal with these dramatic changes, European policymakers are recognising the role the market plays in guaranteeing energy security, promoting low-carbon strategies to drive the transition to a Net Zero economy.

 

Europe’s push for decarbonisation is a bold bid to transform the region’s energy systems, but it also introduces new complexities thanks to a greater reliance on intermittent sources and varied market dynamics. Against a backdrop of geopolitical instability and growing price volatility, energy trading firms are under immense pressure to adapt their strategies and operations to remain competitive and ensure market stability. 

 

The energy sector has always been dynamic, but the current convergence of crises demands innovation at an accelerated pace. This is where advanced energy trading and risk management (ETRM) technologies have emerged as critical tools. They not only support the operational demands of a trading company but also transform the way market participants monitor KPIs, make decisions and optimise processes to ensure energy supplies while minimising risk.

 

The focus has shifted towards creating systems that can handle greater volumes of transactions in real time, while providing the analytical capabilities needed to make informed decisions quickly. 

 

Smarter energy trading with AI

 

Artificial intelligence (AI) and machine learning are revolutionising the decision-making process in energy trading. These technologies enable firms to process vast amounts of data – from weather patterns to geopolitical developments – and generate actionable insights.

 

AI-driven algorithms can identify market trends and predict price movements with remarkable accuracy, offering traders a strategic advantage in stress scenarios. Furthermore, automation, guided by these insights, reduces the time required to execute trades, thereby enhancing operational efficiency and mitigating risks. 

 

AI can also assist in optimising investments in renewable energy sources by evaluating factors such as weather patterns, regional energy demands and market regulations. Originating a power purchase agreement (PPA) or executing a hedge are some examples of common tasks where the AI can provide guidance.

 

The inexorable shift toward renewable energy makes the day-to-day activities of energy traders more complex. Unlike fossil fuels, renewable energy sources such as wind and solar are inherently variable, leading to production volatility and the need for continuous supervision to commit to their production schedule.

 

This has necessitated a move towards shorter trading intervals, from one hour to five minutes, and an emphasis on accuracy. To adapt, firms are leveraging advanced forecasting tools that integrate real-time data from diverse sources. These tools enable traders to anticipate fluctuations and align their strategies with changing market conditions. 

 

From reactive to predictive

 

The current market environment has not only accelerated the adoption of existing technologies but has also spurred innovation in the development of new tools and processes. The emphasis is on creating systems that are not just reactive but predictive and adaptive.

 

This is particularly important as energy markets become increasingly interconnected and influenced by external factors such as regulatory shifts and environmental, social and governance (ESG) considerations. Technologies that can monitor emissions, trace supply chains and ensure compliance are gaining prominence, aligning with the growing demand for transparency and accountability in energy trading. 

 

A key strategic outcome of these technological advancements is the increased focus on speed. Whether the task involves analysing data, executing trades or settling transactions, speed has become a decisive factor in maintaining competitiveness. Energy trading firms are investing in high-performance and high-flexibility systems that can handle the rapid pace of change, ensuring that they can capitalise on opportunities as they arise and respond effectively to disruptions. 

 

New players in energy trading

 

The role of data and digital technology in shaping market dynamics extends beyond operational efficiency. It is fundamentally altering the nature of market participation, shifting towards a data-driven economy that enables smaller players to compete on a more level playing field.

 

So energy trading, once dominated by utilities, trading houses and banks, has now expanded to include new players, such as renewable energy independent power producers (IPPs), distributed energy resource (DER) operators and offtakers (purchasers who contract to buy the future production of an energy project).

 

Cloud-based platforms and AI-driven tools lower the barriers to entry, and this democratisation of technology is contributing to a more diverse and competitive market landscape which, in turn, drives further innovation.

 

Technology is the only way to survive in this new era

 

As the energy sector continues to evolve, the integration of advanced technologies into trading operations is no longer optional but a strategic imperative. The ability to adapt quickly to market changes, manage risks effectively and optimise processes will define the leaders of the future. While challenges such as price volatility and market fragmentation will persist, the tools available to address these challenges are becoming increasingly sophisticated yet simple to use. 

 

The transformation underway in the European energy sector highlights the critical importance of aligning energy trading technologies with strategic objectives. What were once seen as simply tools for matching buyers to sellers have taken on a much more strategic role as enablers of resilience and competitiveness at a time of unprecedented change.

 

The energy trading platform market is nevertheless quite fragmented, reflecting the diversity of energy market participants. To drive effective transformation, it is important that the chosen platform offers seamless integration capabilities and is well matched to the requirements of the client organisation. For this reason, consulting an experienced advisor is crucial to streamline and optimise the vendor selection process.

 

In this era of rapid transformation, the right choice of energy trading platform represents a strategic investment that equips firms with the capabilities needed to meet the demands of a new and challenging era. Choosing the right technology stack to support your business is crucial, but equally important is selecting the right partner to guide you through the transformation journey. This partner should provide an end-to-end perspective – turning strategy into reality and aligning market opportunities with customer needs. That’s where NTT DATA can make the difference.

---

by Miguel Angel Vicente Gonzalez, Commodity Management and Trading Director, NTT DATA

---

To find out how NTT DATA can help the energy industry adapt to the challenges of today’s market, contact us at www.nttdata.com