What are the main challenges to technical and commercial management providers (TCM providers) resulting from new market structures?
Dr. Florian Leuthold: It is important to understand that the TCM provider in a general sense performs all obligations reasonably related to the operation of a renewable power plant, particularly obligations that the investor has. Reading out these tasks, it should become obvious that it is the TCM provider that has the obligation to manage the renewable power plant effi ciently and sustainably such that the investor receives the maximum return from its investment. The early focus used to be on the improvement of technical reliability and increasing the production availability. While the current focus is more on economic effi ciency and, thus, emphasizes market based approaches to the sales of the produced renewable energy. In one sentence, we would argue that the main challenge is that TCM providers are required to interlink deeper with energy traders. They must work closely together and fi nd optimization potentials which might also require software-based systems.
When management providers and energy traders become partners, why then not unite into one company to offer the entire scope of benefits?
Dr. Florian Leuthold: We think the merger of trading houses and TCM providers is one possible option. However, it is more likely that the cooperation between commercial management and trading will increase while the technical management will still be dominated by technical issues. Hence, the economies of scope are there but limited to a certain extent. Actually, vortex energy does offer that kind of service in Poland where we have received a concession as energy trader at the beginning of 2015. We believe that the Polish market needs additional players to withstand the large and often state-owned trading companies. In Germany, we do not see this need at the moment. Also, one should not forget that the approach to put everything in one hand requires professional risk management; otherwise, the traders will control themselves in the future.
What are prerequisites to turn the energy trader into a partner of the management provider?
Dr. Florian Leuthold: vortex energy is active in Germany as well as in Poland. The prerequisites are rather different. In Germany, the service of marketing the produced renewable energy (“Direktvermarktung”) is offered by a number of players reaching from large utilities to niche providers. The market appears to be competitive and the prices decreased over the last years. In this environment, we experienced the willingness of some traders to defi ne customized products together. In the Polish market, the picture is different. The Polish market is dominated by large players of which some are state-owned. Also, the energy utilities are still able to enforce some rigorous rules that give the investor of renewable power plants a hard time. Here the attitude is more like ‘sink or swim’. New players are needed.
Given that energy traders often are large, sometimes state-owned companies, do they have the same understanding of the will to optimize revenues of wind parks as the management providers have?
Dr. Florian Leuthold: In Germany and if the contract structure is well established, we believe that an incentive compatibility can be reasonably achieved. In Poland, the picture is rather unclear. The independent players offer contracts that include incentive based pricing mechanisms. Regarding the state-owned players, we have not yet experienced an open misconduct but an incentive to minimize the cost for the investor of renewable facilities is also not in place. Altogether, the costs for renewable investors are higher than in Germany. It will be interesting to see what is going to happen under the new auction scheme in Poland.
Dr. Florian Leuthold: It is important to understand that the TCM provider in a general sense performs all obligations reasonably related to the operation of a renewable power plant, particularly obligations that the investor has. Reading out these tasks, it should become obvious that it is the TCM provider that has the obligation to manage the renewable power plant effi ciently and sustainably such that the investor receives the maximum return from its investment. The early focus used to be on the improvement of technical reliability and increasing the production availability. While the current focus is more on economic effi ciency and, thus, emphasizes market based approaches to the sales of the produced renewable energy. In one sentence, we would argue that the main challenge is that TCM providers are required to interlink deeper with energy traders. They must work closely together and fi nd optimization potentials which might also require software-based systems.
When management providers and energy traders become partners, why then not unite into one company to offer the entire scope of benefits?
Dr. Florian Leuthold: We think the merger of trading houses and TCM providers is one possible option. However, it is more likely that the cooperation between commercial management and trading will increase while the technical management will still be dominated by technical issues. Hence, the economies of scope are there but limited to a certain extent. Actually, vortex energy does offer that kind of service in Poland where we have received a concession as energy trader at the beginning of 2015. We believe that the Polish market needs additional players to withstand the large and often state-owned trading companies. In Germany, we do not see this need at the moment. Also, one should not forget that the approach to put everything in one hand requires professional risk management; otherwise, the traders will control themselves in the future.
What are prerequisites to turn the energy trader into a partner of the management provider?
Dr. Florian Leuthold: vortex energy is active in Germany as well as in Poland. The prerequisites are rather different. In Germany, the service of marketing the produced renewable energy (“Direktvermarktung”) is offered by a number of players reaching from large utilities to niche providers. The market appears to be competitive and the prices decreased over the last years. In this environment, we experienced the willingness of some traders to defi ne customized products together. In the Polish market, the picture is different. The Polish market is dominated by large players of which some are state-owned. Also, the energy utilities are still able to enforce some rigorous rules that give the investor of renewable power plants a hard time. Here the attitude is more like ‘sink or swim’. New players are needed.
Given that energy traders often are large, sometimes state-owned companies, do they have the same understanding of the will to optimize revenues of wind parks as the management providers have?
Dr. Florian Leuthold: In Germany and if the contract structure is well established, we believe that an incentive compatibility can be reasonably achieved. In Poland, the picture is rather unclear. The independent players offer contracts that include incentive based pricing mechanisms. Regarding the state-owned players, we have not yet experienced an open misconduct but an incentive to minimize the cost for the investor of renewable facilities is also not in place. Altogether, the costs for renewable investors are higher than in Germany. It will be interesting to see what is going to happen under the new auction scheme in Poland.
