strengthened by multitude
energy-trading
24 May 2022
Daniel Kräuter
Electricity is a standardized commodity that can be sold, bought, and traded on power exchanges in Europe. Standardized means that the units are interchangeable as they meet a set quality standard. For instance, 1 MWh generated in Germany is interchangeable with 1 MWh generated in France. Then, how does a company like Convex Energy, which focuses mainly on trading electricity in Europe, demonstrate a solid business model which attracts business partners and financing?
The devil is in the detail. Political, environmental, social, and technological differences between markets and countries bring about opportunities for Convex Energy to diversify its income streams. Subtle distinctions in market designs across Europe offer several possibilities for creating value. One vital and easily noticeable difference between countries may be in the level of the political ambition regarding subsidy schemes for renewable energy. So even though the differences might be slight, their existence makes way for market opportunities to be captured. In this way, Convex Energy can extract value from potentially the most standardized commodity in the world. Hence, access to numerous markets is vital for Convex Energy to profit from unique designs and deconcentrate risk in its business model.
A strong push for decarbonization
A strong push for decarbonization in Europe means the continent often relies more on renewables, some of which are highly intermittent, often dependent on weather – such as wind or solar – and ironically, in some circumstances, unreliable. Even though European countries shift to more green energy sources at a different pace, the change is Europe-wide.
The change is on the way
The devil is in the detail. Political, environmental, social, and technological differences between markets and countries bring about opportunities for Convex Energy to diversify its income streams. Subtle distinctions in market designs across Europe offer several possibilities for creating value.
One vital and easily noticeable difference between countries may be in the level of the political ambition regarding subsidy schemes for renewable energy. So even though the differences might be slight, their existence makes way for market opportunities to be captured. In this way, Convex Energy can extract value from potentially the most standardized commodity in the world. Hence, access to numerous markets is vital for Convex Energy to profit from unique designs and deconcentrate risk in its business model.
company event
New sources of tradable energy
To get there, we are collaborating with a major German energy services provider. The company invests in us because they believe our approach – the intelligent fusion of tech and commodities trading – represents the future of the energy sector
Due to the higher share of intermittent sources across the continent, the power markets have become more volatile, as, more often than not, the absence of wind or solar at a given time can substantially impact not only one national power system. After all, wind and sun do not have to respect the political boundaries of a country or a state.
Convex Energy can extract value from potentially the most standardized commodity in the world. Convex Energy can extract value from potentially the most standardized commodity in the world.
Due to the higher share of intermittent sources across the continent, the power markets have become more volatile, as, more often than not, the absence of wind or solar at a given time can substantially impact not only one national power system. After all, wind and sun do not have to respect the political boundaries of a country or a state. Such scenarios can create difficulties for balancing power supply and demand in larger areas such as regions of the whole continent and significantly influence power prices. By effectively trading volatility in many markets, Convex Energy creates value for its business and investors and, in turn, proves the soundness of its business model.
Currently, Convex Energy is active in several European countries, with a focus on short-term power trading. One could say that the more markets with unique characteristics a company trades, the more opportunities it has for generating gains.
It might be true on paper. It is, however, the ability to seize opportunities across markets that makes a company profitable. At Convex Energy, there is a couple of elements in place to ensure the company's ability to create value.
Firstly, there is the combination of the management experience, grit and curiosity of the employees, and the trust of the shareholders, which help Convex Energy maintain its competitive edge. Secondly, the company owns proprietary technological solutions, which allow it to capture and act on market opportunities – whether they stem from subtle market design differences, enormous weather data sets, or patterns observed by its employees. Last but not least, there is a collaborative culture embracing the feedback loop that makes teams at Convex Energy easily spot mistakes, fine-tune approaches and replicate successes to capture even more value from single-commodity trading activities.
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