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Unlocking the Energy Market Through Technology and Data

By Craig Campestre, Chief Revenue Officer, IPC

Some say there is no market in the world as complex as energy; it is one of the most important commodities in modern life — it’s globally sourced, globally traded — and almost every segment, from production to consumption, is undergoing complete technological transformation. Toss a dart and it will likely hit a new technology that might upend energy markets, from vehicle electrification[1] to materials science advances[2] that border on science fiction.

Renewable energies alone are experiencing amazing innovation, not the least because traders, like the rest of the world, wholeheartedly embrace environmentally sustainable power. Since 2004, $2.9 trillion has been invested in green energy globally[3]. And while each specific source faces unique successes and challenges, overall progress has been steady. For example, solar prices have experienced turbulence[4] over the last year, but that has been policy driven[5] (e.g. tariffs), and future prospects are stunning; experts predict solar energy usage to grow 65-fold by 2050[6].

Other green energies are similarly facing pricing developments with profound implications for worldwide use. Wind energy is expected to soon become the cheapest source of power[7] in large part because of design-related advances in turbine production[8]. Several massive geothermal projects are underway, such as in Iceland’s underground magma[9], which experts hope will one day power much of Europe. Moreover, entirely new forms of renewables are coming online like wave and tidal power[10]. The only thing certain is that there’s much more to come given the incredible commitments being made[11] by corporations and governments globally.

Among non-production advances in energy, the effects of “big data” on energy markets are certainly astounding. Firstly, it’s not just that we’re better able to process existing information, but that new sources of insight are being unlocked through automation. Financial institutions have always sought out as much information as possible about the business of energy, up to and including, counting oil tankers by hand at port. But now more sophisticated sources of data are available, such as micro-satellites[12] with which traders can instantly scan tanker traffic and other important data points globally. As other novel inputs continue to come online, such as “smart” energy meters that update grids in real-time, we can better predict demand, supply, and price.

Relatedly, big data isn’t so much about arriving at the same conclusions faster, but instead is intended to help us glean new insights by discerning otherwise previously unrecognized patterns. Such a lofty premise is possible because big data includes several disciplines, such as cloud computing, analytics, machine learning, and more. Besides forecasting price patterns directly, big data is also instrumental in helping to adjust for unpredictable elements like weather disruptions’ impact on renewable energy sources[13]. Additionally, the dream of two-way power grids, in which consumers and suppliers sell energy back and forth to each other as warranted, requires a network fully capable of understanding itself.

Big data will continue to be a change agent in energy markets for the foreseeable future. Looking ahead, another emerging technology that could transform energy is blockchain, a data structure that creates a digital record of each transaction with a timestamp so that it can’t be modified or deleted undetected. The blockchain is also decentralized, storing data on a computer network rather than just one single device. Labor costs have the potential to decrease dramatically with blockchain since there’s no need to physically draw up contracts in favor of automated, blockchain-based “smart contracts.” Further, capital expenses could decrease thanks to faster settlements, and IT costs should decline as well due to reduced dependence on legacy systems.

The net outcome is that energy providers endeavoring to streamline the trade process with blockchain might one day slash their costs. Estimates vary, but energy companies that employ blockchain are estimated to save 30-60 percent year-over-year by 2022[14]. Several major global energy companies have already partnered to begin testing blockchain implementation of their energy trading[15]. And due to its decentralized nature, blockchain can also potentially add transparency and decrease fraud in energy transactions.

These topics along with others will be explored in length at the upcoming E-World Energy and Water Conference in Essen, Germany, which IPC will be attending. IPC aims to continue to learn from our valued relationships with customers in the energy field. When it comes to energy, improving market efficiency through technology isn’t just an intellectual concern, but can improve all of our lives through cheaper, cleaner energy. The future of energy is exciting because the future of energy continues being unlocked. IPC looks to support forward-thinking industry participants to help further unlock energy industry opportunities.

[1] https://energypost.eu/the-impact-of-electric-vehicles-on-electricity-demand/

[2] https://thebossmagazine.com/graphene-energy/

[3] http://www.iberglobal.com/files/2018/renewable_trends.pdf

[4]https://www.bloomberg.com/news/articles/2019-01-16/global-clean-energy-funding-dips-8-as-china-cools-solar-boom

[5] https://oilprice.com/Energy/Energy-General/Top-Trends-To-Watch-In-Renewable-Energy-In-2019.html

[6] https://www.fool.com/investing/2018/10/14/can-solar-energy-really-grow-6500-by-2050.aspx

[7] https://gwec.net/5-industry-trends-and-market-developments/

[8] https://www.energy.gov/eere/articles/top-4-trends-us-wind-market

[9] https://www.insidescience.org/news/quest-magma

[10] https://www.sciencedaily.com/releases/2018/10/181030174952.htm

[11]https://www.forbes.com/sites/jamesellsmoor/2018/12/30/6-renewable-energy-trends-to-watch-in-2019/#37982e3f4a1f

[12]http://www.impactlab.net/2017/10/18/how-satellites-drones-and-planes-are-making-hedge-funds-money/

[13] https://www.disruptordaily.com/big-data-analytics-disrupting-energy-industry/

[14]https://www.ey.com/Publication/vwLUAssets/ey-overview-of-blockchain-for-energy-and-commodity-trading/%24FILE/ey-overview-of-blockchain-for-energy-and-commodity-trading.pdf

[15] https://af.reuters.com/article/africaTech/idAFL8N1ZF5MH

© 2019 IPC Systems, Inc. All Rights Reserved. The contents of this publication are intended for general information purposes only and should not be construed as legal or regulatory advice.