Business Impact Summary
With the emerging European Gas Market, Stadtwerke Hannover wished to extend its current power trading group into trading of natural gas and other commodities. The utility chose the Ventyx Energy Trading and Risk Management (TRM) solution to manage its trading of all commodities. In addition, due to the flexible nature of the trading system, enercity is in a position to be one of the first "movers" when new marketplaces are established.
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The Company
Stadtwerke Hannover is one of the ten largest Stadtwerkes (municipal utilities) in Germany. enercity, a subsidiary, has approximately 2,731 employees serving households and industrial customers of Hannover with electricity, natural gas, and water. With the opening of the energy markets in 1998, enercity started customer supply outside city limits and currently serves more than 500,000 customers. enercity produces approximately 700 MW in power generation, has 830 GWh in natural gas storage, and sales of 2.271 billion Euros (2007).
The first trading floor in Europe opened at a municipal utility in 2000, and the start of natural gas trading via the Exchange (EEX) began in 2007.
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The Challenge
With the emerging European Gas Market, Stadtwerke Hannover wished to extend its current power trading group into trading of natural gas and other commodities in order to maintain its current leadership position among the "Stadtwerkes." The most important requirements for an energy trading system were: seamless integration of all commodities (e.g., cross-commodity netting and risk figures aggregated on all commodities for a trading partner), high level of system flexibility, excellent handling of structured products, and smart interface to transportation systems.
A system with "neutrality to commodities" seemed the most promising approach, since there is no room for widely varying processes (invoicing, reporting, risk management) relative to each commodity in a highly competitive environment.
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The Solution
The Ventyx Energy Trading and Risk Management (TRM) solution is the keystone for trading all commodities – power, natural gas, and CO2 – in Germany and the Netherlands. enercity utilizes the system for deal capture, scheduling, confirmation, invoicing, and risk management.
TRM provides loading of forecasts and creation of profiles for power and gas, trade entry, and automatic electronic matching of trade confirmations, supporting bilateral and trilateral relationships. The system is also used for external scheduling activities, including handling of plant failure and interruption of gas transports. In addition, it provides daily monitoring of counterparty limits and invoicing with diverse payment dates and sales tax rates.
Electricity prices in Germany have a great hourly variation in the course of a week. The intelligent modeling of varying prices inside TRM makes it possible to have this variation taken into the system with relative low demand of computation power.
TRM manages approximately 400 profile transactions, which are valued against this detailed price data.
To effectively manage risk, TRM provides trading limits on VaR, MtM, Volume, etc., as well as monitoring and reporting on limit usage and key data. It also offers intricate portfolio analysis and risk drill tools, which enercity utilizes for standard and ad-hoc analysis. This helps traders and risk managers optimize portfolios inside defined limit structures.
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The Result
The trading system is the turntable for all energy flows at enercity:
- It enables enercity to optimize their power and gas portfolio. It also contains the logical infrastructure to deliver power and gas to customers based on their varying demand.
- Due to the flexible nature of the trading system, enercity is in a position to be one of the first "movers" when new marketplaces are established. For example, in July 2007 when the Exchange (EEX) started the trading of natural gas in Germany, enercity was one of eight companies starting business on the first trading day.
- The fact that all commodities are managed in a single system leads to identical processes in all steps of trading and data processing. For example, the electronic confirmation system (EFET Net) can handle three commodities without any extra interface or setup routine.
- With the ongoing development of the Gas-Spot-Market, enercity will be in a position to actively engage in cross-commodity optimization trades, all within a single system.
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