Utility Week

Markets & Trading This week Gas tightening spending on information technology could add more than 50 per cent to operating costs US shale 'interesting' for the UK market Scrimping on IT adds cost per energy trade Energy trading companies that tighten spending on information technology (IT) could add more than 50 per cent to their operating costs per external trade, according to recent survey findings. The study by consultancy Baringa found that energy trading Committing 20pc of opex on IT lowers costs firms that committed 20 per cent of overall operational expenditure (opex) to IT incurred costs per trade of about €626. This compared with €981 for those firms that spent less than 20 per cent of opex on IT – an increase of more than 56 per cent. Baringa said the survey was prompted by "a strong desire to pursue a round of cost reduction" among energy traders. Baringa found reverse economies of scale – larger companies incurred greater IT costs. But overall operational efficiency was, according to Baringa, greater than anticipated in the larger traders: "For example, efficiencies of up to 35 per cent could be expected in settlements teams with more than 75,000 trades executed a year. Confirmations efficiency was shown to increase by more than 100 per cent for companies trading larger volumes of trades." Baringa said energy traders were "moving away from a position of growth, acquisition and diversification towards a period of consolidation" and that "flexibility is expensive". Its survey showed that trading new products and moving into new areas increased the ratio of IT and business change costs per trader by three-quarters. It also found that diversification created more "operational issues" that could increase costs and overall risk. TL Market data enerGy Morgan Stanley to Spark competition Falkirk-based energy supplier Spark Energy has boosted its muscle in the wholesale power and gas markets through a deal with a leading investment bank. Spark said the tie with Morgan Stanley Commodities will give it the capacity to hedge long term against wholesale price volatility. Gas 'Right regulations' needed, says PM The prime minister has told the World Economic Forum that Europe must "embrace the opportunities of shale gas" to ensure it "can benefit from the next phases of globalisation". David Cameron told delegates in Davos, Switzerland, if shale gas is developed it will help with the "re-shoring" of jobs, as businesses return to the UK and other European countries. He highlighted the impact shale has had in reducing US industrial gas prices to about a quarter of those in Europe and in helping to create a million manufacturing jobs. Cameron added the "message is clear" that "we need the right regulations" to develop shale gas in a sustainable way and that "if this is done properly, shale gas can actually have lower emissions than imported gas". US renewable energy SUpply 10 28 | 31st January - 6th February 2014 | utILIty WeeK 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Hydropower Wood biomass Liquid biofuels Other biomass Geothermal Solar Wind power Source: EIA capacity will increase by 8.8 per cent in 2014 to about 66GW by the end of the year and will increase 14.6 per cent to total more than 75GW at the end of 2015. electricity generation from wind is projected to increase by 2.2 per cent in 2014 and by 11.4 per cent in 2015. the eIa expects continued robust growth in solar generation, but utility-scale generation will remain a small share of total us generation – 0.4 per cent by 2015. Quadrillion Btu us renewable generation is on the rise; the energy Information administration (eIa) projected this month that both hydropower and non-hydropower renewables will grow by about 3.0 per cent in 2014. In 2015, growth in electric power and heat generation is set to continue at 4.7 per cent, as a 2.2 per cent increase in hydropower is combined with a 6.1 per cent increase in nonhydropower renewables. the eIa estimates that wind Neither domestic nor imported shale gas will be a game-changer in the UK, but cheap US shale will keep up the flow into the UK of cheap coal from across the Atlantic, according to credit rating agency Fitch. The delay in shale development in the UK caused by public rejection on environmental grounds makes imported US shale gas "more interesting", according to Fitch analyst Alex Griffiths. But with European hub prices for natural gas only about $2/therm greater than the likely prices of shale gas imports, this leaves gas-fired generation "not in a great place", he said. Griffiths said cheap gas has made coal-fired power expensive in the US, so US coal exports are depressing demand for gas in Europe. Under the deal, Morgan Stanley Commodities will, on Spark's behalf, buy annually 387GWh of power and 33.8 million therms of gas. Spark said the arrangement will improve its competitiveness against the major players that still control more than 90 per cent of the supply market. "This is a landmark deal for Spark, which allows us to compete with the big six on a more level playing field," said managing director Chris Gauld.

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