Energy Market Resilience Metrics: Analyzing Vulnerabilities and Preparing for Disruptions
Tags: energymarkets, dataanalytics, python, eventdriven
Published: 2024-07-17 08:26:27

**Introduction**
In the dynamic and competitive energy market, companies like EnergiX Enterprise face numerous challenges that can significantly impact their operations and profitability. Understanding these challenges and devising effective strategies to address them is crucial for maintaining stability and growth. This blog post delves into a comprehensive analysis of how regulatory changes, infrastructure and technology capabilities affect EnergiX's operational costs, revenue, demand and energy production and consumption using Python for data analysis and visualization.

**Problem Statement**
EnergiX Enterprise is currently grappling with several key issues:

- Fluctuations in Energy Demand and Supply: The energy market experiences volatility due to evolving consumer behavior and market dynamics, impacting the company's operations and profitability.
- Rising Competition from Renewable Energy Providers: The growth of renewable energy providers has intensified competition, affecting EnergiX's market share and pricing strategies.
- Regulatory Changes and Environmental Regulations: Evolving regulations necessitate compliance measures that increase operational costs.
- Aging Infrastructure and Technology Limitations: Outdated infrastructure and technology hinder operational efficiency and the company's ability to adapt to market dynamics.

## **Data Description**

The four datasets in this analysis can be found [here](https://drive.google.com/drive/folders/172UN3UpD933Xe5woEk7BrVMMdMoQ3CI_?usp=sharing)
1. Historical Energy Data: Contains information on energy production, consumption, prices, and operational costs.
2. Market Data: Provides insights into market prices, competitor strategies, and market trends.
3. Infrastructure and Maintenance Records: Details the condition of infrastructure, maintenance activities, and technology limitations.
4. Regulatory and Compliance Data: Tracks changes in regulations, compliance status, and associated costs.
## Data Cleaning
Missing Values and Duplicates - There were no missing values or duplicates in the data
Datatypes - Converted the Date/Time column in each dateset to Datetime format.

![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/6s5rzc51mzxbpbextexj.PNG)

## **Exploratory Data Analysis*

**Univariate Analysis of Categorical Columns**

I plotted bar plots for all categorical columns in each dataset as follows:

![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/t9i6pd3guu630hxo7bej.PNG)

## **Analysis**
1.Energy Demand, Production and Consumption over Time
Plot the Monthly Aggregate of Energy Demand , Production and Consuption over time.

```
#Extract Year and Month from Date/Time column in historical data
historical_data["Year"] = historical_data["Date/Time"].dt.year
historical_data["Month"] = historical_data["Date/Time"].dt.month
#Create new column Year-Month
historical_data["Year-Month"] = historical_data["Date/Time"].dt.to_period('M')

#Aggregate data on Monthly basis
monthly_data = historical_data.groupby("Year-Month").mean()
# Plot demand, production and consumption
plt.figure(figsize = (12,6))
sns.lineplot(data = monthly_data, x = monthly_data.index.astype(str), y = "Energy Demand", label = "Energy Demand", color="blue",ci=None)
sns.lineplot(data = monthly_data, x = monthly_data.index.astype(str), y = "Energy Consumption (kWh)", label = "Energy Consumption", color="brown",ci=None)
sns.lineplot(data = monthly_data, x = monthly_data.index.astype(str), y = "Energy Production (kWh)", label = "Energy Production", color="green",ci=None)
plt.title("Monthly aggregate of Energy Demand, Consumption and Production over time",  fontsize=14, fontweight='bold')
plt.xlabel("Date")
plt.ylabel("kwh")
labels = monthly_data.index.astype(str).tolist()
n=6
plt.xticks(labels[::n],rotation = 360)
plt.legend(loc='upper left', bbox_to_anchor=[1,1])
plt.grid(True, which='both',linewidth=0.5)
plt.subplots_adjust(hspace=0.5)
plt.tight_layout()
plt.show()
```
![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/ivxksjueil4y5f3vmzpl.png)

It appears that across the years, energy demand has exceeded both energy production and consumption. The company is unable to meet the market demand for energy. As energy is being produced, it is being consumed , i.e. the enery production is directly proportional to consumption. Investigate why they are unable to produce sufficient energy to meet the current market demand.
2. Market Price vs Energy Price

Investigate current pricing dynamics in relation to market trends

![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/yaqgc7lkbsmz0ltiyb3n.PNG)

![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/7r11xr4h0s82p3yp9l8f.png)
Energy price is the price at which the company currently charges for its product. Overall,both prices appear to fluctuate over time which maybe due to macroeconomic factors or regulatory factors. Market price is higher than the energy price, thus an indication of a competitive market. While the current energy prices may give the company a competitive edge, it may affect the profitablity of the company.
3. Investigate correlation between energy demand and energy price.
![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/jx2jqab94z0whclgheav.PNG)

The correlation between Price and Demand of Energy is **-0.005**, a negative relationship, thus no linear relationship between these two variables. There may be other factors that affect the price or demand of their products.

4. Infrastructure Status and Technology Limitations

Investigate the distribution of these two categories.
![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/ucjsbt7364ap2lrx9itq.PNG)
The company is unable to produce sufficient energy to meet demand probably due to the poor state of their infrastructure and the high technology limitations they face during production
![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/x5f8tvj3y6zy0b4ydlx4.png)
There is a high relationship between Poor Infrastructure and High technology limitations. This consolidates the idea that their infrastructure needs an upgrade or overhaul, to upscale their production.
To ascertain this, investigate the correlation between Infrastructure Status, Technology limitations and Energy demand

![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/s15grv0tgu9tpmrj3fze.PNG)
A correlation score of -0.015, suggests there is a weak negative linear relationship between demand and these infrastructure and technology limitations. Energy Production tends to decrease as Infrastructure and Technology limitations increase. While these constraints have a direct on production, demand is affected by other factors. This might also suggest there is a very competitive business environment in the energy sector, that may influence demand.

5. Regulatory Changes and Compliance Costs

Regulatory changes and amendments are frequent during this period of operations. Subsequent compliance costs are quite significant as well.

![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/bkd4ox19nqb2ywxlo1rg.png)
Investigate how these compliance costs impact the operational costs and the revenue generated by the company as well.
![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/d9jk3f29wtoibblkgy8f.png)
Operational costs are the day to day costs incurred by the business. All three metrics fluctuate over time, with the costs exceeding the revenue genated by the business. This business is running at a loss and must adjust its revenue strategies to meet its expenses. They need to adjust their pricing strategies and revenue allocation strategy.

6. Competition Analysis

Analyse Energy source column, visualize trends in production based on energy source over time.
![Image description](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/8hhvbj5zp92grr1cdeb5.png)
There are fluctuations in production of both energy sources, with the renewable fuels seeing spikes in production during certain periods. 
In other periods the production of the renewable sources declined,indicating possible competition, that impacted their overall market share. Focus on renewable sources should be considered, by working on the infrastructure and technology limitations to increase production. This may boost their market share and revenue over time.

## Insights

1. **Dynamic Energy Landscape** - EnergiX Enterprise faces considerable variations in energy production, consumption, and demand patterns. Notably, there are specific periods where demand surpasses production, underlining potential market stability and supply consistency concerns.
2. **Pricing Volatility** - EnergiX's energy pricing exhibits significant volatility within broader market price trends. The energy price remains uncorrelated with energy demand, posing challenges for sales predictability and revenue forecasting.
3. **Infrastructure & Technology Concerns** - A significant portion of the company’s infrastructure is rated as 'Poor'. Combined with severe technology limitations, this necessitates comprehensive infrastructure rejuvenation. Initial analysis indicates that areas of 'Poor' infrastructure status and high technological constraints could result in reduced energy production.
4. **Regulatory & Financial Implications** -EnergiX is currently navigating a challenging regulatory landscape, with new mandates and modifications to existing ones. These financial ramifications, particularly in terms of compliance costs and operational expenditures, are significant. A juxtaposition of these costs with the firm’s current revenue trajectory indicates a pressing profitability challenge.
5. **Emergence of Renewables**- The energy market is experiencing a substantial shift towards renewables. Data trends suggest that renewable energy production instances have exceeded those of fossil fuels. For EnergiX, this highlights the dual challenges of evolving competition and potential market share erosion.

## Recommendations
To address the identified challenges, we recommend the following strategies:

1. **Enhance Market Resilience**: Develop strategies to enhance the company's resilience to market fluctuations and regulatory changes.
2. **Invest in Infrastructure and Technology**: Prioritize investments in modernizing infrastructure and adopting advanced technologies to improve operational efficiency.
3. **Optimize Energy Production and Pricing**: Implement data-driven strategies to optimize energy production and pricing, ensuring competitiveness in the market.
4. **Strengthen Compliance Measures**: Proactively address regulatory requirements to minimize compliance costs and avoid potential penalties.

## **Conclusion**

This analysis highlights the significant impact of regulatory changes on EnergiX Enterprise's operational costs, revenue, and compliance expenses. By leveraging data analysis and visualization, we have provided actionable insights and recommendations to help the company navigate the complex energy market effectively.

Find Full Notebook [here](https://github.com/mwang-cmn/Energy-Market-Resilience-Analysis/blob/main/Energy_Market_Resilience_Metrics.ipynb)