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This year’s North American CTRM market looks different than last year…at least so far

Looking back over the last 5 to 10 years of activity in the ETRM / CTRM markets in North America, there’s been a clear pattern – natural gas and power drove a majority of deals, with other energies (including oil, products, NGLs and LNG) driving a lot of deals as well, but less consistently than power and gas. Other commodities, such as metals and ags/softs were reliable markets as well, but in terms of numbers of new deals, they always lagged well behind the energy markets. This year, however, does appear to be a bit different…at least through the first half.

I was recently speaking with Derek Kraus, sales director for the Americas at Enuit, and he noted a few trends that I’ve heard from others as well:  natural gas and power prospects (and new deal closing) are fewer in number than previous years. On the other hand, oil & oil products deals, including refining and petro-chems, have picked up momentum this year.  Other commodities, including metals and ags, have also been active and running ahead of the last two years. Enuit, in particular, has been developing lots of momentum from metals traders that focus on materials required for battery production (zinc, nickel, etc).  Overall, Derek indicated Enuit is staying busy in most commodities outside of power and gas and in terms of total activity, is running somewhat ahead of previous years.  He also noted a couple of other trends: several of the global scale players have reached out to the firm, looking at potential replacements for their older legacy systems. Other areas of buyer interest that he noted specifically for Enuit include REC tracking, “green gas”, and some early-stage discussions (across multiple commodities) about carbon trading (no doubt driven in large part by proposed and emerging ESG regulations).

As I indicated, Enuit’s experiences so far this year appear to be in-line with others I’ve spoken with.  Given the volatility and persistently higher prices across most of the commodities markets this year, it would be expected that more companies would be looking for new solutions to replace existing spreadsheet-based processes, or older vendor-supplied solutions that might require expensive upgrades or even re-implementations to get the latest capabilities to address the growing risks of these markets.  That said, given that the natural gas markets have been one of the more volatile this year, it might seem a bit curious why are we not seeing the same level of activity as the two previous years, including even during the pandemic.  One potential answer is that coming out of the pandemic, natural gas players stepped up IT spending to address deferred and previously planned projects and may have “stolen” activity from the first half of 2022.  Another theory is with the record volatility in the first quarter and continuing high levels in the second half of the year, many natural gas players decided to wait on pursuing new systems as they were simply focused on dealing with the day-to-day challenges of the current markets.  Whatever the reason, at ComTech, we do anticipate the natural gas space will start to pick-up in the third and fourth quarters as more oil and gas producers, and many mid-stream players, find themselves flush with cash.

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In the power markets, utilities have been a very consistent segment for years and several vendors that specialize in that space have indicated that they are still seeing good interest. Renewable power centric CTRM deals have been down so far this year as many new wind and solar projects have been delayed for several reasons, including escalating costs, supply chain issues, and uncertainly on the part of developers over the timing and length of tax subsidies.  However, now that the so called “Inflation Reduction Act” has been passed, and renewable tax subsidies have been extended for at least ten years, all market watchers expect to see accelerated development of new solar and wind projects and, as a result, demand for new systems for managing both the commercial and operational aspects of those facilities.

In all, and despite the first half of the year being a bit outside the norm, we continue to expect the North American market will show decent growth in 2022 over 2021.