Back in the 1950s and ’60s, utilities operated like little islands — each with its own generation and load, isolated from others. But after a few major blackouts and growing demand for reliability, things started to change. We became more interconnected. Today, with renewable resources, far-flung load pockets, and more complexity than ever, energy trading is what keeps everything aligned.
I’m Devin Elverdi, ETRM Product Manager at PCI. I’ve worked with utilities and market participants navigating that shift, and in this post, I’ll break down what energy trading really means and why it matters today.
Learn more in our blog post, “What Is an ETRM System and How Does It Work for Power Companies?”
Video caption: Devin Elverdi, ETRM product manager at PCI Energy Solutions, shares how energy trading became essential as the grid evolved.
What is energy trading?
Energy trading is the process of buying and selling electricity or fuels — either in organized markets (like CAISO or SPP) or through bilateral contracts. The goal is to optimize cost, ensure reliability, and take advantage of price opportunities.
From a trader’s perspective, it’s really a giant math problem. You’re constantly balancing supply and demand — sometimes every five minutes — and trying to avoid volatility. If you overshoot or undershoot, you risk causing a blackout or taking down a generator. There’s very little margin for error.
That’s why trading desks work around the clock, adjusting forecasts, managing bids, and thinking strategically about what to offer, when to offer it, and how to stay operationally sound in the process.
What is energy risk management?
Every trade carries risk — price volatility, delivery failure, credit exposure, or system constraints. Risk management is the process of identifying, measuring, and minimizing those risks while keeping operations reliable.
Energy risk managers monitor:
- Market exposure: How sensitive your portfolio is to price movements
- Credit risk: What counterparties owe you — and how likely they are to default
- Operational risk: The reliability of your assets or partners to deliver energy
- Regulatory risk: Whether you’re aligned with compliance, audit, and reporting requirements
The goal isn’t to eliminate risk — it’s to surface it early and act on it effectively.
What are the key steps in the trading and risk process?
Energy trading isn’t one action — it’s a full cycle. Here’s a simplified view of how the process works:
- Market analysis and forecasting: Traders evaluate market conditions, asset performance, and upcoming constraints
- Bidding and trade execution: Energy is bought and sold — either in organized markets or bilaterally
- Scheduling and operations: Accepted bids are matched with generation, transmission, and load
- Risk tracking and compliance: Teams monitor credit, pricing, and margin exposure
- Settlements and reporting: Delivered energy is validated and closed out financially
If you’re doing this without a system, it becomes a juggling act. Spreadsheets, email chains, and disconnected tools only make it harder to react in real time or stay compliant.
Where should teams start?
If you’re building or evolving a trading desk, start by understanding what’s different about your operation.
There are universal principles in energy trading — but every shop has its own quirks. You might be operating in a specific market, managing a unique load profile, or supporting a generation portfolio with some edge cases. Learn those details. They’re the ones that will make or break your success.
Video caption: Devin Elverdi, ETRM product manager at PCI Energy Solutions, explains why new traders should start with what makes their operations unique. Want to hear more from Devin? Watch the full Hot Takes video for more insights on what energy trading looks like and how to approach it.
Learn how PCI supports every step of energy trading and risk management
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