Hitachi Energy’s expanded portfolio steers clients through volatility

Hitachi Energy’s expanded portfolio steers clients through volatility

Three years after acquiring US-based commodities trading and risk management (CTRM) software firm Pioneer Solutions, Hitachi Energy is reaping the rewards of its large portfolio

Since the acquisition, the firm has focused on leveraging the various parts of its wide offering and embedding them wherever possible into the trading platform, in order to improve efficiency and aid decision-making. 

“This gives us a unique offering in the marketplace and allows our clients to optimise and improve their decisions across assets,” says Michael Hinton, global head, energy portfolio management at Hitachi Energy.

Being able to leverage data that can inform decision-making has been particularly useful during the unprecedented market volatility of recent months and is one of the biggest reasons behind the firm’s impressive performance in this year’s Energy Risk Software Rankings, Hinton says.  

The firm registered 10 first places in physical trading, operations and logistics software, and came first in five categories in derivatives software.

What operational challenges has the increased market volatility created for Hitachi Energy’s clients?

Michael Hinton, Hitachi Energy
Michael Hinton, Hitachi Energy

Michael Hinton: The unprecedented run‑up in energy prices meant companies had to revise their procurement and position valuation strategies. Companies may have used options to hedge their portfolios, and suddenly options prices spiked because of market volatility, so [they were] no longer a desirable or viable instrument. This meant they looked for other instruments – linear instruments, such as swaps – which had a knock-on effect. They also tried to manage capital and margin calls associated with various instruments and had to look at different transactions, or try to shore up supplies through purchase price allocations or other types of transactions they hadn’t faced historically.

How does Hitachi Energy’s offering help solve these challenges?

Michael Hinton: The solution provides a solid foundation for all the key areas in scenario analysis, helping customers model the ‘what if?’ scenarios and determine how certain variables impact their trading portfolios and assets. Being able to go through and understand different scenarios as they’re formulating hedging strategies and how that impacts positions, capital and operations sets us apart. Also, we deliver the ability for customers to value and understand, model, manage and set up more complex transactions. For example, our software allows firms to understand the risk and cashflow associated with transactions such as power purchase agreements.

What was Hitachi Energy’s major focus during 2022?

Michael Hinton: We put a lot of effort into helping our customers streamline and improve efficiency. Our market communication tools give users the ability to bid into the market, receive awards back, and incorporate the information into our CTRM platform. That structure improves efficiencies for our customers, who can use us as a one-stop shop rather than having to look for a third-party solution.

In the 2023 Energy Risk Software Rankings, Hitachi Energy came first in 10 categories in physical trading, operations and logistics software for the second consecutive year. What is Hitachi’s strategy in these areas?

Michael Hinton: It comes back to the overarching strategy of leveraging our knowledge of assets … and not just in the electrification stream, but also into the fuels driving that, as well as renewable energy. Being able to leverage the information that sits in all of these solutions and bring it back into the trading portfolio really drives value and the decision-making our customers have.

Another example is being able to optimise your batteries and bring them into your trading portfolio and receive awards from the market. Even further, it’s being able to look at your fuel streams, optimise your natural gas networks and make decisions around how you’ll dispatch and use storage, and bring all that back into your trading platforms. This allows our customers to make the best decisions around how to use their physical commodities and layer hedging to drive profit back to their organisations.

Hitachi Energy gained five first places in the derivatives software section of the survey. To what do you attribute its success there?

Michael Hinton: It comes back to the flexibility of our software, the ease of use, the intuitiveness the ability to create templates that make capturing information very quick, easy and intuitive for our customers. Our solution is built for the cloud and is therefore able to deliver new capabilities and faster speeds, which drives a lot of the value our customers look for in transacting.

Hitachi Energy has topped our green certificates category for two years running. What have been its standout achievements in green energy in the past year?

Michael Hinton: We aim to be a true partner to our customers as they move to net zero. We are able to adapt our solution to different certificates, as well as to any changes as those markets evolve, and this allows us to stay ahead of the competition. We’re going to continue to deliver capabilities around the granularity of the certificates. You’ll see the market want more traceability of those certificates, managing the points of production associated with points of consumption for each and every certificate. 

Through our knowledge of the market and by working very closely with our sister and partner companies, we’re able to stay in lockstep with what’s happening in the market, as well as drive and influence some of those changes directly.

See the full Energy Risk Software Rankings 2023 results

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