Despite Tough Times, Marketing Has Room to Grow
Merger turmoil and tight margins are putting the screws to quite
a few energy marketers, but Frost & Sullivan still sees plenty
of room for the industry to grow. Several of the top-20 marketers
of 1998 have exited the market, while other companies have been
spurred to acquire assets and start online trading, according to a
recent study by the group.
In some cases, marketers are striking alliances to increase
market share or just merely survive. At any rate, scores of
marketers that have sprung up over the past few years suddenly are
evaluating whether to remain in the volatile marketplace, according
to Frost & Sullivan's "North American Wholesale Energy
"In 1998, energy marketing, which includes both wholesale
natural gas and power marketing, was a $157 billion industry,
growing almost 30% over the 1997 figure of $123 billion," the
report says. "By the end of the forecast period in 2005, the market
is expected to reach over $313 billion in revenues, growing at a
compound annual growth rate of 10.4%." Last year's "market growth
was severely disrupted by marketers' internal restructurings and
changes in strategy following two consecutive summers of price
spikes in the power industry, coupled with low natural gas prices.
This, however, is expected to be an anomaly, and growth is expected
to reflect the long-term trend again in 2000."
Dramatic increases in merchant power generation are expected to
provide increased volumes in the wholesale market, Frost &
Sullivan said. "Deregulation has allowed the number of merchant
plants to multiply in North America. Because these plants generate
electricity solely for sale in the competitive wholesale market,
expansion of this field will drive growth in the power marketing
The study found online trading sites are improving efficiency
and decreasing the time needed to complete deals.
"The industry has seen a tremendous increase in the use of
cross-commodity deals that leverage the convergence of electricity
and natural gas. These types of deals, such as tolling agreements,
allow marketers to capture new arbitrage revenues as the prices of
each commodity fluctuate against one another."
Joe Fisher, Houston
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