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INTRODUCTION
In an industry continually forced to adapt to significant and fundamental change emanating from all directions, innovation is both necessary and to be expected. Many energy and commodity trading firms are now rightly very concerned with adaptability in their processes and systems to be able to successfully maneuver into an uncertain and changeable future as smoothly as possible. Under pressure to handle greater volumes of business and transactions in real-time, optimization, automation and AI are all tools potentially being deployed to assist. Change is ubiquitous in the industry, but includes the energy transition, which is shifting the generation mix and requires transactions in smaller time increments to try to match up to increased production volatility. That means greater amounts of data requiring faster analysis and an enhanced focus on the speed of trades, transactions and decision making. Other significant drivers impacting the industry include ESG, emissions monitoring, traceability, shifting and new markets and instruments, and much more.
Innovation has so far resulted in the wider use of automated trading, often directed by AI and algorithms, to help speed up decision making and the initiation of trades. This in turn has required greater focus on data management, visualization, and consumption, as well as in areas like scheduling, planning, forecasting, settlements, and more besides. The key is speed and automation, and AI is increasingly deployed to help with that. Sometimes this involves automated processing by machines with exception management used to help keep human involvement focused sharply on where it needs to be.
Of course, this has had a distinct impact on technology adoption. Increasingly, buyers are seeking clouddeployed applications, often in the form of ecosystems of inter-connected applications that can talk with each other to get the job done. AI, Machine learning and
automation from workflow through to the application of algorithms, are also being deployed. As cloud deployment has surged, managed services are also being adopted to help maintain these applications and technical environments.
This combination of technological and business trends has combined to drive innovation in many areas. One of these innovations is the emergence of a new trend to outsource various operational functions and processes in which a vendor’s cloud-based solutions are used to provide the framework for having the business performed by the vendor – whether completely, or on an out of hours basis only.
Suddenly, there are several new and existing vendors emerging that are offering services like risk as a service, trading as a service and outsourced operations
in energy and commodities. Acting on behalf of the customer in executing transactions on their cloudbased software is a natural and logical extension of software as a service, and while it’s cute to call those outsourcing offerings things like ‘risk as a service’, it essentially means that the business function or process
is outsourced to a vendor. One of the vendors that clearly sees outsourced services as a key strategic component to its business is Energy One, and this white paper looks at that company’s approach and capabilities against a backdrop of unprecedented industry transition.
OUTSOURCING – A NEW TREND IN ENERGY & COMMODITY OPERATIONS
It is a truism that there have been a few niche suppliers of outsourced services in energy and commodity operations through the years. These have historically served customers in areas like scheduling and dispatch, for example. However, choice of provider was limited and their ability to scale geographically or functionally was often lacking. The last decade or so has also seen the growth of various forms of ‘outsourcing’ in trading like Direct Market Access (DMA) services, for example. In DMA, the client pays a fee to utilize the infrastructure of an established trading firm. Overall, though, outsourcing at the operational end of things has been somewhat limited to date and the term outsourcing is probably more associated with the handover of back-office departments and functions like accounting or IT, for example.
However, as the pace and volume of change in the energy and commodity markets has accelerated, and as cloud and software as a service has become more popular, outsourcing is also increasingly an option. Areas such as trading, risk management and reporting, operational services like scheduling and auction bidding, control room operations and more are now being outsourced more often – either for out of hours coverage or full 24x7. Many smaller entities have and are being established that utilize an ‘ecosystem’like approach, in that the business focuses on what it believes its strengths are and looks for partners to
perform other functions. For example, 24/7 trading firms that focus on trading strategies and use others to perform downstream functions. Additionally, with staff being in short-supply and more expensive, even larger entities that do everything in-house are seeking to defray costs by obtaining out of hours and weekend coverage for certain functions. We see this trend only accelerating as the software as a service model is catching on and brings with it a new option to extend the service provided beyond supply of the software and into delivering the business processes on behalf of the business.
Indeed, as software as a service involves a different thought process in that the software is provided under a services agreement as opposed to purchasing a onetime license to use it. The software is essentially rented or leased, and the vendor operates under a service level agreement that defines everything from system availability to delivery of support and maintenance. It is therefore just a short step to take to add in the outsourced delivery of the business function as well, either for out of business hours, or completely. We think that this is aiding the rapidly increasing popularity of outsourcing aspects of the operational side of the business and will continue to do so. We also see an increasing number of vendors beginning to offer various discrete outsourced services on top of their software often touted as risk as a service, trading as a service and so on.
Outsourcing also offers a few benefits. These include potentially:
• Obtaining access to experts and professional processes without the need to hire expensive resources. For small firms and startups, this is a cost-efficient approach that ensures via a service level agreement a determined level of service for a known cost,
• Out of hours and weekend/holiday coverage – for larger firms this provides cost efficient flexibility and can avoid staff burnout,
• Operational scalability allowing the business to scale up or down for periods of time without the need to hire, train and direct additional employees,
• Operational adaptability as a third-party takes on the responsibility to stay up with market and regulatory changes and other adaptations required in a rapidly changing and dynamic industry,
• Access to expertise as required,
• Assurance of professionally delivered services from a reputable firm,
• Selectively outsourcing operation of categories or a portion of assets in the portfolio – possibly less strategic assets - reducing load on in-house trading operations staff.
The benefits of outsourcing are broadly well-known, and they involve cost reduction, staffing, expertise, and coverage as described above. In an industry that is fast changing, dynamic and competitive, outsourcing certain operational activities is increasingly proving to be an attractive option.
One firm that is having success offering a variety of different outsourcing opportunities is Energy One. With a history of providing software solutions in areas like trading, scheduling, bidding, and portfolio and contract management, and outsourced operational services in areas like scheduling and logistics, it has taken the next step, and is offering a range of outsourced services in all these areas of business. An additional benefit offered by Energy One is that it has a follow-thesun capability by virtue of its European and Australian footprint, and this is proving to be a compelling aspect of its proposition going forward.
ENERGY ONE’S APPROACH AND DIFFERENTIATION
Energy One is a global supplier of software products, outsourced operations and advisory services to wholesale energy, environmental and carbon trading markets. In the last few years, it has started to build up a services side to its business that essentially utilizes its own software solutions to provide outsourced operational services to customers. However, by virtue of its footprint with offices and expertise located in Australia and in parts of Europe, Energy One can offer a 24 by 7, follow-the-sun capability that differentiates it from its competition in this area. This allows its teams of experts to service the requirements of its customers seamlessly around the clock.
Energy One has grown its outsourced service business quickly under current market conditions and provides outsourcing of operational functions and processes such as contract and portfolio management, nominations, bidding, and physical and financial trading. It will likely add other areas in the future. It has rapidly become the largest outsourced services provider in this area in Australia and the second largest in Europe.
Energy One has consolidated several individual 24/7 teams with operations desks in European and Australian energy markets over the last few years, including its acquisitions - eZ-nergy (France), EGSSIS (Belgium) and CQ Energy (Australia). It has taken this footprint and enhanced it by launching a global solution, combining its software products with a premium service offering as a ‘following the sun’ service capable of providing 24/7 operational coverage of global energy markets. With its control rooms in France, Belgium and Australia, it is only vendor we know of that is able to provide 24/7 operational energy services.
Energy One sees several benefits to be derived from adopting their outsourced operational services on a full-time or out-of-hours basis including,
• Around the clock coverage and the flexibility to rapidly scale up or down with business needs this includes control costs as maintaining a team of staff to provide 24 by 7 around the clock services can be expensive if performed internally,
• Peace of mind that the job is getting done by experts - even out of hours and at weekends when internal staff may not be available,
• Complete compliance, privacy, and confidentiality is assured,
• Full disaster recovery, redundancy and back up as a matter of course.
However, the basis of the service is that Energy One experts provide complete or out of hours operational services on behalf of the customer meaning that the strategy remains with the customer. Everything is
handled through a service level agreement meaning predictable costs along with significantly reduced risk of disruption. With global reach and local experts, Energy One’s offices around the world handle the scheduling, nomination and balancing of their customer’s energy portfolio for intra-day and day-ahead markets. Its experienced teams are both agnostic and independent service providers acting on behalf of the customer.
It further sees its follow-the-sun capability as adding benefits and accentuating others such as,
• Better response times to activation requests, imbalances, or capacity overshoot warnings,
• Better quality of service during volatile trading sessions (most often in winter)
• Lower error rates as there will be more staff on hand at all times to assist and execute the needed checks and balances
• Importantly, this enhanced service does not increase any costs to existing customers.
Energy One has found success in offering these services in areas like providing smaller entities with a complete capability and expertise in an area that it does not currently cover nor plan to cover. Here, Energy One becomes a partner in an ecosystem of best of breed expertise and capabilities. It has also found success in providing out of hours, weekend and holiday coverage to larger firms that do have internal capabilities and expertise but needs greater peace of mind outside of normal office hours. With the pace of change in the industry, lack of skills on the market and sheer costs of operations, Energy One offers its customers a readymade solution that helps reduce risk and costs while assuring of a high-level of know-how and delivery. It goes without saying that Energy One utilizes its own popular and commercially successful software solutions to offer the services.
OUTSOURCING OF OPERATIONS SET TO CHANGE THE INDUSTRY
There will likely always be companies that prefer to recruit, train and retain their own staff and capabilities in operational areas of the business. However, with the pace of change in energy and commodities, and a shift in how business is conducted on the back of software-as-aservice and strategies built around utilizing ecosystems
of partners to deliver cost-effective and best-in-class business functions, it seems that outsourcing is set for a resurgence in the operational side of energy and commodities. Energy One is leading the way by virtue of its best-in-class software solutions and its ability to offer 24 by 7, follow-the-sun services.
ABOUT ENERGY ONE
Energy One is a global supplier of energy trading software products and operational services to wholesale energy, environmental and carbon trading markets.
Listed on the Australian Stock Exchange (ASX:EOL) since 2007, but with more than 15 years of market experience, the Energy One Group of companies has a successful track record of providing sophisticated, practical solutions and services to Australasian and European companies operating in the fast-paced 24/7 wholesale energy marketplace.
The Energy One Group is the largest supplier of 24/7 operational energy services in Australia and the second largest in Europe. Its software can be combined with its premium 24/7 service offering, enabling the seamless and successful entry of renewable energy into international electricity markets.
Energy One’s suite of software products includes ETRM, process automation, automated bidding/ nominations and algorithmic trading. In addition to software, Energy One provides services to operate their software and manage the operation of renewable assets on behalf of customers.
Energy One’s clients include energy retailers, generators, users, customers and traders ranging from
start–ups to multi-national organisations. Its suite of products and services offer proven market solutions for European, UK and Asia-Pacific energy participants, enabling the management of their entire wholesale energy portfolio.
Energy One’s market operations services provide a 24/7 ‘follow-the-sun’ approach, where experienced and dedicated teams work together and act on behalf of customers across the world in scheduling and nominations for day–ahead and intra-day markets.
Energy One’s team of industry experts specialise in each of the relevant technical areas and its network of local offices means that it can provide local support to its customers.
Over the last five years, several companies have joined the Energy One Group. These include Contigo Software Limited in the UK, eZ-nergy in France, EGSSIS in Belgium and CQ Energy in Australia. Contigo, eZ-nergy and EGSSIS now operate under the Energy One brand. In Australia, the CQ Energy brand is a strong, respected provider of consulting, broking and trading services.
ABOUT
Commodity Technology Advisory LLC
Commodity Technology Advisory is the leading analyst organization covering the ETRM and CTRM markets. We provide the invaluable insights into the issues and trends affecting the users and providers of the technologies that are crucial for success in the constantly evolving global commodities markets.
Patrick Reames and Gary Vasey head our team, whose combined 60-plus years in the energy and commodities markets, provides depth of understanding of the market and its issues that is unmatched and unrivaled by any analyst group.
For more information, please visit: www.comtechadvisory.com
ComTech Advisory also hosts the CTRMCenter, your online portal with news and views about commodity markets and technology as well as a comprehensive online directory of software and services providers. Please visit the CTRMCenter at: www.ctrmcenter.com
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