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Thoughts From E-world 2024: Normalizing ETRM Extensibility for Non-Standard Contracts

The top themes at the E-world 2024 event in Essen, Germany last month were the energy transition and the security of supply. People who visited our booth at the show had deeper questions about Beacon’s capabilities in the areas of: 

  • Enhanced functionality for trading power and gas
  • Core differentiators of our extensible platform that can complement major ETRMs
  • Flexible modeling for power purchase agreements (PPAs) 
  • High-performance compute for intraday and real-time risk analysis

Fitting a square peg into a round hole

There was a growing sense among attendees that they should not have to put up with the “square peg in a round hole” nature of adapting their legacy ETRM system to modern energy market requirements. Many were concerned about the general lack of support and extensibility in their ETRM for structured trades and specially-negotiated contracts.In particular, flexibility of pre-trade analytics and smooth end-to-end post-trade workflow were top of mind for many people.

Adapting to non-standard contracts

The market for PPAs is very active in both the US and Europe, which is promoting a move towards the standardization of valuation approaches for these contracts. Visitors to our booth were attracted to our flexible framework which offers a basic modeling foundation and quant approach, but also allows them to include their own cash flow simulations and proprietary models. Beacon makes it easy to compare value & risk across different scenarios and apply this to the whole portfolio including hedges.

Capturing all aspects of deals

Classic and mature ETRMs have been a safe choice for managing standard trades, but that is no longer enough for many energy traders and suppliers. The current and future energy market requires a system that can capture all of the details of energy contracts into the trading system, including structured trades and specially-negotiated contracts. And it’s across the board, from pipeline deals and liquified natural gas contracts to renewable PPAs. Our transparent and customizable instrument definitions that enable clients to add new products, adapt to changing markets, and capture custom contract details were of great interest to booth visitors.

Managing intraday risk

Alongside the growth of non-standard contracts has come a need to increase the frequency and caliber of risk reporting. End-of-day analyses of positions and exposures are not frequent enough. Our live demonstration of a variety of our dashboard widgets, including forward curves, risk Greeks, PnL and NPV plots, positions, and transactions being updated in real time as the market ticked drew a lot of attention.

Growing demand for extensibility and performance

The market today needs a platform that is designed to be extensible right from the very foundations. This includes the ability to support all phases and aspects of non-standard contracts, including:

  1. The pre-trade negotiation period, including strong support for front office structuring activities
  2. Trade capture, quickly adding new fields or new underlying pricers and providing a capable edit screen
  3. Post-trade and delivery, handling post-trade amendments with integrity and transparency, even if these changes require enhancements to the underlying analytics
  4. End-to-end lifecycling, including inventory management of emissions certificates and Guarantees of Origin and flexible settlement capability

And it must have the scalable capabilities of modern, cloud-native to deliver analysis and reports on demand. All of these points are everyday fare to us. We’ve been building our product over the last 10 years to handle exactly these cases – and the demand for these capabilities are as great as we’ve ever known it.