Trading Power, Carbon & NGOs

Good evening,

Long time passive WSO lurker here that has decided to finally register and engage on the forums.

I finished my postgraduate degree towards the end of last year and after several applications and interviews I managed to land a job as a junior trader at a power utility company. I have been working there for a couple of months and I am about to open my own book, where I will focus on european power markets, NGOs, and the carbon market. I will be trading financial products, not the physical side of the business.

My first question is whether european power, NGOs, and carbon are worth specializing in. I have read numerous discussions on the forum regarding energy trading, specifically oil and gas, and therefore I am wondering if those commodities are more exciting products to trade and if it would be possible to potentially move over to those markets in the future. Also, is the renumeration considerably higher for those commodities in general?

Secondly, I would love to know what you guys think about the shift towards more quantitative implementations in commodity trading. I'm struggling to find positions available where prop trading the beforementioned commodities is the primary role, and of those I have found there does not seem to be the same quantitative requirements as opposed to more quantitative trading positions in equities. The reason I'm asking is that I have access to an overwhelming amount of data at work (as I imagine most commodity traders do) which I'm analysing frequently, however many of the other traders I have spoken to don't have advanced programming skills and what not. Is this normal?

Lastly, where do the most successful power/carbon/gas/oil traders go? Do they work for big utility companies or perhaps at the 'Majors'? Are there many funds that specialize in european power and carbon?

Sorry for the lengthy post. If you have the time to answer my questions or perhaps have a question for me, please feel free to reach out and I'll answer whenever I'm available.

Cheers! :)

Comments (39)

marcellus_wallace, what's your opinion? Comment below:

First off, wont lie man no idea an NGO is or stands for but I assume its to do with power/carbon. That being the case you are entering one of the hottest sectors in all of trading, truly a quick google search can solve that for you. 
Quantitative skills, you need to be mindful we are in an era "energy transition" and with that comes "skills transition". You cannot remove senoir people who hold key fundamental information for those with superior skillset right away. So instead most analytical roles and pretty all vendors are moving to a quantitative tool kit. One shop in particular, analytics team builds models and outsources all database/higher end coding to a coding firm.

A bit out of scope here (dont trade europe). But my sense is europe is not liquid and fully "unregulated" to have full on FTR style trading all over. That said I think europe moved to closer "with-in month" trading a lot faster than the US simply due to they invested bigly in renewables way faster. So the transition will continue.

Funds/independent hiring like crazy for Euro Power dudes.

Missed a part of you question but you are going to learn in particular in europe, you could have 15 million data sets and sometimes stuff wont make sense till you find a guy who got the info from a guy from a guy. Just way it is majority of these assets are optimized and owned by massive congolmerates who do not like to share info. An example is how does a plant decide their hedge ratio, how serious they take their 2week out wind forecast, some of these places may know their plant trips more/less etc.

hippitus, what's your opinion? Comment below:

Thank you for your well thought out respond, I appreciate it.

Come to think of it 'NGOs' are extremely niche and the abbreviation might be something my team uses as it didn't return any results on Google. My apologies.

I definitely see that there is a lot of hype and investment into renewables, however I have not seen much about the trading aspect of it. Perhaps it's lagging slightly in Europe? As Europe moves towards an energy mix that is dominated by renewables there is a greater stochastic element to the forecasting. This should force market participants to integrate more quantitative models?

Also is it worth spending a considerable amount of time learning the technical aspects of meteorology, as the weather forecasting element is only becoming more relevant.

Do you have any comparable information regarding power/carbon vs metals vs oil/gas remuneration?

Most Helpful
marcellus_wallace, what's your opinion? Comment below:

Energy guys are getting paid much more for the time being. Look up the HC insider podcast.

Guess this where mainstream is protected somewhat and you need to be in the know to find some information. Basically coming out of the pandemic, Europe made a commitment to take "EU Carbon" pricing seriously this has led to EUA to be one of the most talked about topics for 2021 additionally the developing world (Asia) came out of the pandemic gangbusters so Europe went into a full out "energy crisis" in early 2021 summer and then UK power broke in late Q3 and since then it is in a prolonged energy crisis. The energy mix is has been changed by renewables over last 3-5 years massively as retirements from coal/nuke took place. 

Yes majority of good power traders have a sense of weather and the major meteorological patterns/analogs and teleconnections. There is research being done right now on "wind speed" and "wind speed vs wind chill". Beyond that, to understand the quant shift in power need to look up things like duck curve, lack of new power lines/congestion etc..I cannot really get into that here ha.

Truly be lucky you have a very strong skillset, coming into one of the key markets worldwide right now where the stuff youll see in short-term here one may never see again just an a crazy environment to learn.

Lastly, you can get on linkedin and follow like ICIS guys and see that every morning european power/gas is basically spoken all over. Again majority of mainstream is not seeing this as the EU governments are secretly bailing out their people for now...that all I said I am on the side of "transition" and think EU electorate as a whole is willing to pay for it "crisis or no crisis".

Ginny, what's your opinion? Comment below:

Im in eu energy since 2015, you are in a good spot and when i started there were not jr trader roles, you had to make your bones in ops/mo/trade support to understand the fundis, so dont fuck up your chance, is great, feel free to dm for more details.

  • 1
hippitus, what's your opinion? Comment below:

Hi, DM'd you a lengthy question if you don't mind :)

Heartcore, what's your opinion? Comment below:

EU ETS has been a sweet trade since 2020. It is unfortunate that it is tradeable only on Frankfurt via German-only brokers, which comes w/ tax, admin and bureaucracy implications, but there is no free lunch out there, right?!

  • 1
tractionattraction, what's your opinion? Comment below:

I've traded voluntary offsets, it's a pretty wild west market with large bid/offer spreads and brokerage. It's very relationship driven and not analytical at all if that is your thing.

  • 1
hippitus, what's your opinion? Comment below:

I'll add some of my questions here and if anyone can contribute to one or more, I'd really appreciate it!

1. Which type of power trading is regarded as the most difficult to land a job in/most interesting daily work/compensation for intra-day/day ahead-years ahead speculative trading/FTR (any other main types I'm missing?).

2. Whats the landscape like for different companies in the energy amrkets regarding difficulty of land a job/work-life balance/compensation? Do European hedge funds partake in speculative energy trading? If so, what's that like compared to working at a bank or perhaps a company like Shell/BP/Trafigura/mercuria/vitol?

Chargeupenergy, what's your opinion? Comment below:
  1. shift/intraday is the easiest to got into, less well regarded comparing to the rest, but personally believes that it feeds you in a lots of edge as you will learn about some niche details about different stuff that is very useful in the longer term comparing if you started from forward, Which partly due to the not so well sharing cultures and strong barriers of knowledges between desks in some firms. the rest does have that big of a diff as most of the forward peeps still milk alot from even DA products. Its all about how good is yourself in your own game, its not the banking kinda game that TMT> minor desk in here.
  • 2
Chargeupenergy, what's your opinion? Comment below:

WLB wise, i think most of them are quite good comparing to the banking hours as much as i can heard of, obviously there are some desk is also quite famous of having great/ terriable hours in some firms but that needs you to take the time to do the homework to ask around desk by desk. Work culture wise is still diff such as vitol is very diff with Trafi etc etc, so best is to have a chat with them and get a grip of it yourself, cus each have a very different standards and ideology.

And yes, theres loads of HF does energy in Conti, Cita, deshaw, millennium or some other smaller onces. Comp wise, sell side think it should be norm comparing to other major trading desk, buyside, i personally think it is amazing comparing to the rest of the finance world, and people are hiring like crazy since last year so its a simple high demand less supply hence higher price situation, but perhaps i am bias cus I am doing what i enjoy.

  • 3
hippitus, what's your opinion? Comment below:

Anyone have any experience with shell or centrica? Specifically trading power and gas (quant or discretionary).


hippitus, what's your opinion? Comment below:

Quick follow-up question. I've mostly been prop trading, where would that skill set be applicable? Just prop trading desks? Or would it be possible to move to BP/Shell or Trafigura/Vitol?

Best regards and merry Christmas!

DeltaDecay, what's your opinion? Comment below:

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