Power market forecasting and analysis

PA Consulting Group offers a proprietary market-modelling framework to forecast power market prices, unit operation, unit revenues and costs, and value of power generating and transmission assets.  Our team of industry experts applies best practice market price forecasting principles and leverages deep insights into energy market dynamics to deliver sound, independent results. The use of proprietary data and modelling tools serve as the backbone of this process and is enhanced with PA’s expert opinions culminating from a comprehensive view of the ever-changing energy market landscape. Advantages of our framework include:

• interdependency among several unique modelling tools.

• harnessing of real-time market research and data gathering.

• insight gained from this mix of public market data, market models and proprietary databases.

PA's strong framework of market forecasting, analytics and valuation are used in multiple types of assignments including capital markets and strategy, environmental and market policy, litigation support, restructuring, and finance and accounting advisory services.

We emphasise providing an understanding of the underlying markets and the key risk factors to assist investors in better understanding their investments in the energy sector. The graphic below illustrates the depth of our approach to power market modelling.

Fundamental market price forecasting: PA’s fundamental approach to market price forecasting utilizes a variety of models run in tandem to ensure continuity of assumptions. Each model is populated entirely with PA assumptions for unit operating data, fuel prices, load and energy projections, emissions costs, and transmission constraints. When greenhouse gas legislation changes, PA captures the effect not just on emission pricing, but also on related assumptions such build plans and natural gas prices to ensure a consistent and viable approach.

Renewable market analysis: With 30+ states adopting renewable energy standards (RES) or renewable goals and a possible Federal RES legislation looming, the addition of renewable generation and the associated added value of renewable attributes are important factors to consider in market price forecasting. We maintain a detailed database of the renewable energy portfolio standards across the US. We track the addition of renewable generation and have developed a comprehensive proprietary model to specifically analyse the existing and evolving REC markets. Through this analysis, PA develops projections of the renewable generation to be added to the markets and incorporates this into the fundamental forecast and projection of Renewable Energy Credits (REC) in applicable markets.

Environmental modelling: Our team utilises a proprietary linear programming model that simultaneously solves for the optimal combination of coal selections, unit dispatch, and allowance prices over the forecast period.  PA designed the Multi-Pollutant Optimisation Model (M-POM) to find optimal market-driven, environmental compliance options, given multi-pollutant compliance requirements.  It is designed to explore emission costs and benefits in terms of fuel choice, capital investments in pollution control equipment, allowance market purchases and generating unit operating decisions.  M-POM is a dynamic, inter-temporal model that simultaneously selects technology (new units and compliance technology) and dispatches units over a 30-year horizon.

Stochastic dispatch analysis: Electricity prices are highly unpredictable due to physical characteristics (non-storability) and network dynamics (unpredictable load, generation and transmission outages, etc.). Price volatility may impact energy margins, particularly for some types of units. PA assesses the impact of price volatility on specific assets by using its proprietary stochastic dispatch model. This model is designed to simulate market price volatility and plant operating decisions made in the context of market uncertainty. The results of the stochastic dispatch include plant operations and gross margin projections.

To learn more about our capabilities in power market forecasting and analysis and how we can support you in the areas of capital markets and strategy, environmental and market policy, litigation support, restructuring, and finance and accounting advisory services, contact us now.