Recently, I spoke with Chris Regan, Brady’s Product Director for Energy about developments in UK power markets specifically. He warned at that time that several smaller UK suppliers were concerned over how high gas prices were, noting that a couple of years ago, a significant number of these smaller supplies failed when the prices went up and they hadn’t done enough hedging. He was correct as in the last week or so, about half a million households have had to be moved to a new energy supplier after both Utility Point and People’s Energy became the latest energy companies to go out of business amid the record UK energy market prices. In fact, as prices in the UK for power and gas reached record prices, seven suppliers have failed so far and as Chris told me a few weeks ago, “There’s a lot of worry about even more consolidation in the supply markets.”
The high current curve price in the UK is driven by gas prices, which in turn, are related to the the lack of LNG coming in and worries over some of those big pipelines from Russia, he told me. He also sees batteries as increasingly important in the future by virtue of a strong investment case for batteries which will drive a battery build out. Looking forward, he points to increasing use of EVs and a need to build out local distribution systems to cater for this demand; particularly in the introduction of a flexibility market to avoid curtailment of supplies to electric vehicles in the future. Indeed, a very similar point was made by Enspired Trading’s CEO, Jurgen Mayerhofer, in a recent CTRMRadio podcast. Chris also noted the demise of the gas boiler and electrification of heat that is also going to cause increased demand and place further constraints on the system. For him, the key point is interrupt ability and flexibility as all of this occurs. “You’ve got a low inertia, high intermittency, higher demand system with sources of flexibility that are no longer large power stations but smaller micro events that need to be built up into Virtual power plants.”
This all adds up to a challenge going forward in which risk management will be to ensure that players have their basic underlying hedges in place to manage renewable PPA’s against baseline customer demand, he said. Longer-term risk he sees as being managed through traditional ETRM solutions where volumetric uncertainty in the portfolio can be managed however, in increasingly volatile short-term markets, it’s all about delivery in that short-term. Here, he sees the need for new tools to aid traders and others to optimize and short-term risk manage their business. “You need a bespoke short-term power trading solution that allows you to be able to trade in the day ahead market in multiple regions with multiple asset types with lots of different kinds of micro assets all the way through to the intraday continuous market and then manage your exposure to system prices because you have all of this variability and intermittency but also, all of this flexibility. So Brady’s Power desk solution is designed to complement any longer term ETRM strategy to allow you to do the physical delivery of power into the short term markets and manage your risks in a way that you need to in this new energy complex.”
In the past, Brady has had a track record of acquiring solutions. However, Brady’s PowerDesk software represents a significant step away from that strategy as it is being developed internally and represents a significant investment by the firm. Having seen demonstrations of the software, it’s modern UI and use of up-to-date technologies clearly differentiates it as a new development and the brainchild of Chris and his team. With the active involvement of potential users and commitments from several firms to the software, the product is expected to be rolled out towards the end of the year. When it does so, it really represents something a bit different in the market allowing automated and algo trading, optimization, and short-term market position management with a focus on UK and Nordic markets. It will help traders to better identify opportunities in increasingly volatile markets and given the recent track record of failures of power and gas business in the UK, its introduction might well be viewed as very timely.