5 Trends Reshaping Power Markets Globally

How Renewables, Real-Time Markets, Algorithmic Trading, and More Trends Are Impacting Today’s Industry

 

Today’s global power market is transforming at a breakneck speed. There are major shifts happening as more data, integrated world economies, and inventive power sources emerge.

What should we expect in 2019’s power market and beyond?

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The move to real time.

The reality is power markets are moving closer to real time.

For many decades, commodity traders made decisions based on intuition, conversations with colleagues, and basic stats. With the emergence of the Internet, AI technology, and data management capabilities — oh, how the tables have turned. As a result, machine learning and algorithmic trading have become essential to managing massive data influxes from 5- and 15- minute markets.

Naturally, the transition to programmatic trading is a challenge.

Trusting a computer to make what have always been instinctual decisions is a tough pill to swallow. However, going from 24 to 288 daily increments of settlement data with 5-minute settlement makes it impossible not to utilize commodity analytics. Then, with generation sources such as wind, solar, biomass, and hydro now being 30 percent of all capacity in western and central Europe, the solution to preventing grid instability is real-time markets.

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A more connected and liberalized world economy.

Globally, markets are becoming more and more integrated — especially as renewables become even more viable. When emerging markets, such as renewables, enter world financial markets — it leads to significantly larger and more integrated equity markets.

As the U.S. remains an open power market leader, Europe and Asia also move closer to liberalization. Europe is putting forth more effort to physically integrate existing regional electricity markets, by removing barriers between regions and countries. As the continent builds new interconnection procedures for cross-border capacities, its power markets continue to unify.

Though in various stages of liberalization, many Asian countries are starting with C&I or retail choice programs. These are all designed to encourage additional investments in generation capacity — for both conventional and renewable sources. However, there are still social, political, and geographical barriers impacting Asia’s power deregulation. Having the world’s largest population and continent, the obstacle remains for each Asian country to solidify what works for its economy.

Renewables are the future.

The growth of global renewables is happening at an exponential rate.

A June 2018 study by BP, shows from 2007-2016 that renewables are outpacing all other fuel sources.

Fuel TypePer Year Growth Rate
Nuclear-0.7%
Oil1.1%
Coal1.3%
Natural Gas2.3%
Hydroelectric2.9%
Renewables16.2%

Also, the International Energy Agency (IEA) forecasts that by 2022 we could see a global spike in renewables energy by 43 percent. According to the IEA, China, India, and the United States are estimated to make up two-thirds of all global renewable expansion. The rise of renewables have been fueled even further by governmental subsidies like investment tax credits. Over the last decade, various national and state tax schemes have encouraged investment in wind and solar installations, including utility-scale, industrial, and residential.

The power transformations discussed just scratches the surface of what’s happening. Download our global market trends white paper to learn the newest in today’s power markets.

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