AARHUS, Denmark (Reuters) – Far from the vast expanses of the financial centres of London and Frankfurt, germany, high-tech entrepreneurs in the Danish city of Aarhus have been driving a rapid change in the European energy market, the facilitation of the transition to a sustainable energy technology involves a number of risks.
FILE PHOTO: a View of the Aboulevarden is in the heart of the city of Aarhus, Denmark, July 10, 2019 at the latest. REUTERS/Nina Chestney/File Photo
The red-brick buildings, cafes and streets are full of cyclists in the city, on the coast of the peninsula of Jutland, belie the sophisticated, computer-driven trading in electricity and gas consumption in Europe occurs in approximately 10 companies which are established here.
However, the wind fields in the vicinity of the flag, the origin of a forward-looking company. The leading global wind turbine manufacturers-Vestas (VWS.CO.), and Siemens, Gamesa (SGREN.MC of the roots are in Denmark, which now covers about 30 percent of its energy needs with renewable sources of energy.
The rapid diversification of marketed renewable energy, which, in combination with the ever-increasing competition, and digitalization in the traditional European power and gas, has been able to reduce the margins and short contracts, and it brought an explosion of data for traders to consider.
The algorithms will be able to examine the live data on the output of the wind turbines and solar panels, the ever-changing weather patterns, demand, and price data are a much faster, more accurately and at a lower cost than a human trader.
As a Dane named Henrik Lind, saw an opportunity in Aarhus, where Vestas is based, and the set-up of the Danish Raw materials in the year 2004. These and other firms, as some of the former Danske Commodities employees are able to use algorithms and artificial intelligence to reap the rewards of real-time fluctuations in supply and demand.
“A knowledge of the industry is made up of electricity, natural gas, renewable energy, Big Data, artificial intelligence, artificial intelligence – a combination of the traditional markets such as the Silicon Valley of tech,” said Jesper Johanson, the director and co-founder of InCommodities, – one of the four Convention-based firms, Reuters said.
The energy companies and the banks have their own trading desks to experiment with the automation, the utility companies are also dipping their toes into the world of business, but some would say that to the customers, the stakes are a lot higher and if they get it wrong.
In an ideal world, the technology will enable energy producers to sell their produce at the best possible price, utility and cost, and provides a stable, and the bankers and the brokers to make money in the market that is smooth over the sharp changes in supply or demand.
The balance of interests and ensure transparency and predictability, it is a challenge, but the experts expect that the regulation will evolve, as it has for the financial markets, such as the food market develops.
DATA IS GOLD
Specialist companies are on the rise, as is the shift away from fossil-fuels, which introduces a set of new variables.
“I can think of InCommodities, just as much an IT company as a commodity trader,” said Johanson, one of the four founding members of a two-year-old company, which now employs 35 people in the trade in the short-term electricity and gas in ten different European countries. All four founders have previously worked at Danske Commodities.
InCommodities’ profit before tax jumped 529% in the previous year to € 7.9 million ($8.9 million), and there are plans to expand into the UK-gas-next-year, and the emissions markets, and, potentially, liquefied natural gas in the future.
Notwithstanding the Commodity has been purchased by the Norwegian oil and gas major Equinor (EQNR.E) last year, with 50 dedicated to energy traders, are now more than 3,750 transactions per day, 24 hours a day, 7 days a week, and to 38 the power of markets.
In contrast to the InCommodities, which is acting for himself, Notwithstanding the Raw materials are bought and sold on behalf of the client, which could be energy companies or renewable energy producers, the profit before interest and tax rose by 28 per cent last year to 72 million euros.
“We will treat the data like gold. We have to believe in it. The AI and the algorithms that are important in order to be able to take advantage of the trend towards digitization and the development of a competitive advantage in the power of the markets,” said Andrew Schwartz Knudsen, the company’s head of commercial business development.
The leading European power exchange, EPEX SPOT, said the auto market started its platform in 2012, and last year accounted for about a third of the record, the intraday and day-ahead volume of 567 terawatt-hours (TWh).
Six senior officials in the company, from denmark, well-established companies which are engaged in the trade, is interviewed by Reuters, saw the European power market is becoming so complex that only computer modeling, combined with human traders, it was able to handle it.
Investments in automation technology, the cost of 100,000 euros to a few millions, but it was the most successful, and has a payback period of between one and two years, according to Philippe De, the leader of the group, energy, utilities, chemicals, business consulting, Capgemini.
Even so, some people have to be careful.
The Swedish energy company Vattenfall’s CEO Magnus Hall said the company has made in the market, as well as “under control”.
“If it goes wrong it seriously goes wrong,” he said over the phone. “Some of the others are doing, it is often the case, however, we believe that there is a need for more security and safety in the workplace.”
THE FAIR MARKET
The players in the market and in the Convention itself as a force for good in a market that is much more unpredictable than it ever was in the pre-1990 era of the state to deal with the fossil-fuel-based to regional supply and relatively stable demand.
“The transition to an increased share of renewable production, and increases in the volatility of the market,” said Sebastian Lund, a managing partner of the Convention, on the basis of the Nordic Energy House, which was founded by four former Danske Commodities employees, and is focused on the Uk and Ireland-the intraday power market.
“Dealers provide liquidity to the market, and to play a key role in the establishment of a dynamic fair market pricing,” he said.
With the increasing electrification of the power to homes and businesses, and with the prospect of millions of electric vehicles through a network of renewable energy, as well as the traditional suppliers to give an idea of the complexity of moving forward.
Algorithmic trading is at a relatively early stage compared with that in the financial markets, but if it does develop, it will be more difficult for the traders in the monitoring of the measurement of the factors behind the market’s moves.
The potential risks have drawn the attention of the monitoring body in the European market, and the transparency of the regulatory framework, the european Agency for the Cooperation of energy regulators.
“The two most important risks that have been studied are of potential use as a tool for the manipulation of the market, and the possibility that the algorithms themselves, in particular circumstances, are vulnerable to manipulation,” he said.
The existing law is already applicable, ” he said, while adding that: “the Provisions of the securities laws and the practices of the financial market authorities, could be helpful.”
The reward for successful power trading, to grow.
The Volumes in some of Europe’s most important wholesale markets were also broadly stable, at 9,270 terrawatt-hours (TWh) last year, an increase of the prices can be pushed to its nominal value by up to 25% on a 7-year high of 459 billion, research company Prospex said. The total amount of European gas, and trading value rose by 35% last year, to more than one trillion euros for the first time.
“As for the technology, and the market becomes more sophisticated, the products and the profits shrink,….however, the companies playing in the market, it’s the best, with the most advanced technology, and claim the larger share of the profits,” said Antti Belt, a managing director and a partner at the Boston Consulting Group.
In germany, the continent’s most liquid equity on the market, and in the very short-term trades is increasing, while the German power producers, and grid operators are concerned about the possibility of the failure of the country’s shift to renewable sources of energy.
In-country and cross-border capacity is not an issue, and with a population of more than 83 million, Germany has about 14 times as many people than its northern neighbor, Russia.
There have been, so far, the experience has been very good.
“Denmark, it is now widely recognized as a world-leader in the integration of variable renewable energy sources, while at the same time, to maintain a reliable and secure electric power grid,” the International Energy Agency said.
At Danske Commodities, with the average age of its 300 employees in 33, and 73% have a master’s degree or higher, some of them even in cosmology and nanophysics. The talent pool for the it and other companies are situated in front of the door.
Reporting by Nina Chestney and Susanna Twidale in LONDON; additional reporting by Vera Eckert in FRANKFURT, germany, Lefteris Words in OSLO and Stine Jacobsen in COPENHAGEN; editing by Philippa Fletcher