Gas and Power Markets
Belbridge Consulting offer a range of business consultancy services tailored to firms trading within the European gas and power markets.
The physical gas market can be broken out into three segments;
Upstream – the exploration and production of gas.
Midstream – the transportation of gas through a network of high pressure pipelines to large end-users or distribution grids. This activity also incorporates the movement of liquefied natural gas (LNG) from LNG facilities to marine tankers and to a regasification terminal.
Downstream – the retail of gas through local distribution zones to business and domestic consumers.
Of course, wholesale trading and risk management can take place across all of these streams, with prices being set and risks hedged throughout the value chain.
One of the growth areas within natural gas trading is the inherent flexibility in transportation offered by LNG. Liquified Natural Gas (LNG) is natural gas in liquid form, which can be transported between countries in custom LNG vessels or trucks. This gives traders ultimate flexibility, as there is no dependence upon a pipeline or available capacity. A shipment of LNG can be effectively rerouted to achieve the best sale price – providing the buyer has available capacity in a dedicated regasification terminal.
This degree of flexibility and trading arbitrage often proves difficult for traditional wholesale trading platforms to contend with, as in this example, the price and the ultimate delivery is unknown, making a fair P&L valuation quite subjective.
Like natural gas, power can be broken out into three similar segments;
Generation – the generation of power at a power station. Note that for power, the method of generation (steam coal, natural gas, nuclear, hydro, wind) is a key factor in the resulting transfer price.
Transmission – the transmission of power through extra high voltage (EHV) networks and across transmission zones. Power can be transmitted across borders and through country interconnectors.
Distribution – the retail of power through local distribution grids to business and domestic consumers.
Like natural gas, power is also traded throughout its value chain – with significant talent being spent in trying to optimise and minimise the imbalance between supply and demand. Potentially large penalties can apply to firms which find themselves out of balance with the market operators, so a large operational effort is needed to track supply and demand in near real-time, and to ensure that nominations to each of the affected grid operators are in place ahead of the nominations gate close.
How we can help
Whether it is helping to configure new markets into your existing ETRM system, or whether it’s an initial assessment of the functionality required to commence trading in a new commodity or area, Belbridge Consulting can provide you with expert guidance gained from many years of hands-on experience in these complex markets.
By utilising our knowledge and expertise to supplement your internal project teams, you can be assured that your business and technology teams are able to both understand the needs and the pitfalls of these markets but also to translate the abstract network terms into real meaningful requirements that are unique to your firm and its operational processes.
A solid understanding of how these energy markets will truly affect the day to day trading and operational processes within your firm will ensure that your project team has the best possible information in order to deliver the right solutions and to allow your firm to extend its trading footprint without creating undue operational breaks and manual exception processing.