For those already in the industry now, curious what your guys thoughts are for trading in the next 5-10 years. East Markets are getting absolutely slammed, there is no more volatility with all the cheap gas builds and it's become an extremely difficult and competitive environment to trade.
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With Donald in the office, and Dodd Frank maybe getting pushed aside wholly-- honestly, pretty positively. In trading, physical commodities reign supreme. No algorithm,no robot, no computer will replace us. It's still really solid pay, it's not like it was 8-20 years ago, though. If you're new in it, and high up, it's great.
Great w/l balance, great solid salary. Things always change.
I think a lot of it now regulations, can we play ball or not? If we can play ball, shit will start getting serious. At least in gas, you already see the banks (privately and publicly) trying to recruit financial traders heavily. Citi is out there hiring aggressively after firing, MLCI just hired, Wells is going to step in soon, too.
I'm happy in this position. The one's that have been in the industry since the 80s are retiring or falling off, the ones that came in the 90s are in the extremely high level jobs, the late 90s/early 2000s guys are now senior VPs, and the new age people are going to be stuck in logistics. So if you're coming in after 2010, and are already high up(as in trading, with a book) you're in a great spot.
What product do you trade?
Natural Gas.
Do you think renewables and storage could kill the market? Electricity is a volatile commodity due to the inability to store in significant quantities. Tesla now has a 80 MW battery, I wouldn't be surprised if we had 1 GW batteries in the coming years. Storage changes the most significant distinguishing factor of energy trading.
Battery tech is seriously lagging behind it's true, when it catches up it will surely effect the make up of the market, one of the issues with so many renewables is the lack of ability to store that energy for when it's actually needed.
There is a lot of focus in the UK on grid balancing projects in the moment, which I expect aim to effectively reduce volatility by smoothing out disparities in supply and demand. Not sure how/if it is a thing in the U.S given the physical size of the market, but interesting to see how it develops.
What do you mean by East?
Which markets?
Gas as in gasoline or gas as in LNG and/or natural gas?
I am talking about power
Look at the shit storm India is stirring up! There will be volatile markets ahead.
Very interesting thread - thank you for posting
I would argue that lack of volatility (as op referenced) makes it difficult for both physical and paper traders. This is likely more exaggerated for the financial guys since location arb, ruptured pipelines, supply gluts, etc and the myriad other opportunities that exist in the physical world will still be around regardless of volatility.
What effect will pealing back Dodd Frank have aside from letting the banks and swap dealers hop back in the game?
I guess we should specify which product. For power markets, storage technology is very disruptive. I agree that gas and oil trading will always opportunities.
Banks back in the game, mean they have more leverage to get into the phys side again. Not that they haven't started to, but they are now more aggressively. I know this based on talking to Citi, and being close with MLCI too.
More market makers the merrier, I'm all for the helter skelter of it.
Morgan Stanley Goldman and Citi never left the game. Deutsche Barclays and JP Morgan left pretty recently, doubt they are coming back any time soon.
Wouldn't put too much weight on Dodd-Frank or King Donald being game changers for energy trading. The things affecting power markets go way beyond banks pulling out and it's hard to picture gas rebounding right now.
The heated political products of the moment (steel, aluminum, crude...) seem much likelier to be affected by what Trump does. And I really hope the Fed's guidance on keeping banks out of those things sticks (higher rates should help too).
To those of you working in power trading, what would you guys say is the best way to make my resume stand out as an intern. Right now I'm working in a BO intern role with a company that provides a trading product (think genscape, platts, etc.). This summer I locked in either ERCOT as a Market Analyst intern, or an internship at a small (tiny) prop trading firm that trades power exclusively? What's gonna catch a HF/BB's interest more?
interning at a small shop doesnt have much exit opportunities imo
That was kind of my concern as well; still waiting on some of the big dogs (i.e. Constellation, EDF, NRG, etc.) as well as PJM. Where would you say I could find the best exit ops (IPP, more speculative/financial shops, utility)? Also, out of curiosity, what market do you trade?
I would go for Ercot as you'll be privy to so much information that the market isn't
I work on a power desk and started out doing a placement for the network operator; even a few years on I feel my knowledge is more rounded than other guys in our dept
When you say I'll become exposed to information that the general market doesn't know, what kind of info are you referring to? Also how long did you work for the UK operator?
What we have seen in recent years in California at least is the increased volatility for intraday vs. intrayear as a result of significant renewables build. Lots of conversations about the "duck curve". I agree with you that every time I see some sort of break through in battery technology, I fear for the outlook for power trading. It will be a game changer and i think it will come sooner than we think. I suspect the power trading will vastly change over the next few decades.
I agree that it comes sooner than we think. I was watching an interview with Elon Musk and interestingly enough he thinks the future is bright for utilities. People may be underestimating EV demand.
Future is always bright for utilites, it's one of the best revenue generating ways to make money. Buy/sell based off market, and force the rate-payers to pay. Why do you think Berkshire Hathaway invested in a utility, and then backed it up with a pipeline company and a holdings company?
I'm not liking what I see in the next 5-10 years. There is already overbuild of assets and dirt cheap fuel. If Trump actually starts cutting back environmental regulation that means coal is back to being economical in east pjm, nyiso and isone. Add to the fact that most utilities are putting all their attention on the transmission side of the business and upgrading lines all over the grid. The congestion you saw as recently as 3 years ago in pjm (PS north, BGE) is gone, even nyiso zone A doesn't rip as much as it used to. Oh yeah Exelon/Entergy started a domino effect with ZEC getting NY to subsidize money losing nukes, then got Illinois to essentially do the same thing (side note: it's pretty crazy the power Exelon has to sway local govt). For my money I'd bet NJ, PA, MD and likely parts of NE are soon to follow. If you trade purely cash, it would be smart to start looking for other options in the industry with better long term outlook (that's what I did). If you're trading further back in the curve, things aren't as dire. I hate to sound doom and gloom but this is the new world of power trading we're living in.
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