An Interview With: Thomas Schmitz, Commodity Trading Week APAC 2026
As power markets across APAC contend with weather volatility, fragmented regulation, and cross-border constraints, Thomas Schmitz, General Manager, Energy Markets APAC at Aquila Capital, shares a practitioner’s perspective on what is truly bankable in the energy transition. From transmission risk and PPA innovation to battery storage economics and price risk, the discussion explores how investors and traders are adapting as markets evolve heading into 2026.
1. We hear a lot about major cross-border agreements, like the ASEAN (LTMS) project. Beyond the high-level announcements, what are the practical, on-the-ground frictions that traders and investors are actually grappling with? What are the true ‘unbankable' risks you're seeing? Are the high-level agreements stalling because of practical frictions like misaligned grid codes and a lack of firm transmission rights, or is it a deeper lack of financial instruments to hedge long-term political, currency, and counterparty risk?
We are not active ASEAN, however, in general, the lack of firm transmission rights for cross border capacity or a firm congestion management regime impose significant delivery risk on any long term PPA, which would render the PPA non-bankable.
2. Power markets and your portfolio are fundamentally exposed to weather-induced volatility. How is this changing your business? How is this shaping your core investment and commercial strategy? Is the primary answer in physically coupling assets (like solar + battery), or are you seeing a greater need for new PPA structures and financial hedging products to manage this ‘merchant tail' risk? And as you look at emerging market designs, like in China or Vietnam, are they being structured to properly value the flexible, clean capacity that assets like yours provide?
Like other regions on our globe, the APAC region is also exposed to increased weather and climate volatility, which impacts rainfall/wind patterns across the region and often heightens hydrological and solar/wind variability in SE Asia and Australia – directly affecting merchant revenues, curtailment and basis risk.
Physically coupling assets (solar+storage, wind+storage) is an option to capture intraday spreads in markets without negative pricing and provide firmed supply from intermittent generation. Furthermore, it enables projects to reduce exposure to negative pricing and via time shifting can avoid curtailment. That said, physical coupling alone does not solve multi‑day weather events or seasonal regime shifts so it must be paired with more innovative PPA structures to transfer financial risks.
We are seeing a mix of shorter‑tenor, “as generated” PPAs, fixed shape PPAs as well as capacity style PPAs which transfer the intermittency risk to the Buyer. Furthermore, virtual tolls and financially settled capacity swaps are being transacted for BESS offtake, as are revenue floors and collar structures to monetize volatility while protecting downside but still offering some merchant upside to the Seller.
We cannot comment on China or Vietnam.
3. In established markets like Australia and high-potential ones like Japan, there's intense focus on battery storage optimisation and profitability. Traders know the buzzwords – arbitrage, FCAS, ancillary services – from your position, what do you see the real-world economics of ‘revenue stacking'? Are the models for co-optimising energy arbitrage and grid services (like FCAS) living up to the hype, or are the operational complexities and regulatory risks still the primary barriers to making these multi-million dollar assets consistently profitable?
In the NEM, fleet‑level data shows rising gross margins when assets actively arbitrage and switch into FCAS (especially VF‑FCAS) opportunistically – precisely what the co‑optimisation thesis predicted. However, with more and more BESS coming online in the NEM, the revenues in the NEM wide FCAS market are being cannibalised thus reducing opportunities for all BESS in the grid services market in Australia.
Furthermore, revenues vary widely by region, constraints, ramp‑rate strategy, and duration. Model outputs can look great, but in practice, constraint‑induced separation, risk‑of‑island requirements, enablement windows, charge or discharge directions from the market operator and the need to keep state‑of‑charge to capture scarce FCAS intervals all complicate dispatch and reduce “perfect foresight” value.
Frequent rule evolutions (e.g., VF‑FCAS transitions, local requirements in SA/QLD, changing interconnector constraint equations) add basis risk between modelled and realized margins. Well governed bidding and constraint‑aware strategies are now as important as hardware. Furthermore, an organisation’s risk appetite also impacts the revenue opportunity of the asset.
4. You attended Commodity Trading Week APAC before, and now it’s expanding to a full 2-day conference. What was a key insight or a standout interaction from your previous experience? And as the event scales up for 2026, what are you most looking forward to and what’s the central theme you’ll be bringing to your own session?
One of the most valuable takeaways was the growing emphasis on integrating real-time data analytics into commodity trading strategies. Very interesting were also discussions with peers on how PPAs for intermittent generation, renewable energy certificates and carbon markets are increasingly shaping trading decisions – highlighting the convergence of traditional commodities with sustainability-driven instruments.
I am looking forward to deeper dives into cross-market dynamics, particularly how energy transition policies in APAC are influencing price volatility and hedging strategies. The additional time should also create space for networking sessions, which I see as an opportunity to connect with both technology providers, other developers, traders and regional market operators.
I’ll be focusing on “Navigating Price Risk in an Era of Decarbonization and Market Fragmentation.” The goal is to explore practical approaches for managing exposure across multiple commodities, shifting from firm energy generation to intermittent, weather dependent generation and increased basis risk between markets.
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An Interview With: John Macnamara, Commodity Trading Week APAC 2026
Ahead of Commodity Trading Week APAC, John Macnamara of Carshalton Commodities examines trade finance risk, regulatory red flags, lender behaviour, and fraud exposure as 2026 approaches.
