The CTRM Blog

Yesterday I received a press release from Allegro regarding its “go live” at Repower (formerly Räetia Energie), an international energy company based in Switzerland that has implemented Allegro 8 to manage its emissions trading activities, and is extending the implementation to handle its power and natural gas trading. Repower will utilize allegro 8 as a single platform to manage the company’s complex trading operations across multiple commodities, locations, and trading floors throughout Europe. The announcement can be found here.

Late last year, CommodityPoint and Global Change Associates released a report titled Emissions Monitoring & Trading Software sponsored by IHS, Locus Technologies, Navita, Nirvanasoft, SunGard Energy and VisionMonitor. That study found that only 18% of the respondents utilized a commercially provided CTRM solution to handle their emissions trading requirements but that 30% said that they planned to procure emissions trading software in the next 24-months.

Trading emissions is, not surprisingly, increasing and there are a broader array of instruments to trade and exchanges to trade on. While many trade simply to hedge cap exposure there are also signs of increased ‘speculative’ trading with traders seeking to profit from spreads. We expect emissions trading to continue to mature and evolve and increase in sophistication and complexity. In reality, there are two aspects to trading emissions;

• The first is to ensure that the enterprise is adequately covered in terms of allowances with trading of allowances taking place in accordance with its emissions footprint. In essence, this is akin to ‘physical commodity’ trading in that the actual allowances have to be managed and tracked internally and with respect to the registries. It is in this area that we might have expected a need for greater integration between the trade capture solution and the emissions monitoring solution.

• The second is in the trading and risk assessment of emissions instruments in a more speculative trading environment. While most CTRM software solutions can support this requirement to an extent it often also involves some additional and specific functionality if the area of speculation is in CERS from CDM projects for example which again require tracking and managing.

Almost every company, particularly generators and utilities, will need to manage their allowances and ensure that they are adequately covered. This form of ‘emissions trading’ is not effectively covered by many existing CTRM solutions today and is immature from a commercially available software perspective although solutions like that from Allegro, SunGard Energy and IHS do offer significant functionality. Allegro currently is one of the few that can provide functional coverage for both of the requirements above and, with this announcement, it seems to be finding some success.

Note: The above mentioned report may be found available for purchase at http://www.commoditypointstore.com

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