The Brattle Group has extensive experience helping electricity industry participants understand the risks and opportunities surrounding their critical business decisions in a rapidly evolving market. We regularly analyze major investments, construct resource plans, and evaluate the implications of public policies.
Our consultants bring a broad perspective to these problems grounded in knowledge of electricity market fundamentals and regulations, enabling us to frame the most important issues to analyze in order to most effectively and efficiently inform the decision. Our skill set in electricity market analysis is unparalleled. We are experts in financial modeling, option pricing, decision analysis, and risk management, and market analysis and forecasting.
Energy Asset Valuation
Valuation of energy assets can be complex and challenging because the markets in which they operate are evolving and the assets themselves often have complex operational constraints and flexibilities that impact their cash flows. The Brattle Group has particular strength in applying market simulation and financial tools to evaluate the complex risks, operational flexibility, and options that are often associated with energy assets. Valuation questions frequently require us to draw on our related strengths in financial modeling and risk analysis to capture the effects of flexibility or optionality, contract terms, and financing decisions. We bring all of these pieces to our clients to value physical and contractual assets in a broad range of high-stakes contexts, from business strategy and planning to expert witness testimony in contract dispute cases.
Market Price Projections
Reliable and well-designed projections of electricity market prices are often the basis for many analyses utilities rely on for critical decision making. Our experts utilize market simulation tools to forecast both expected power prices and future market conditions as well as risk scenarios with logical combinations of alternative outcomes for key drivers, from which we apply financial valuation techniques to assess the operating characteristics and costs of plants. Similarly, clients depend on our market simulation modeling of price forecasts and volatility to determine the optimal timing and size of transmission projects. Our simulation of market prices also includes the impacts of renewable generation projects or potential transmission constraints on locational prices. We have also supported utilities seeking stranded cost settlements requiring credible projections of future market prices based on projected fuel prices and environmental compliance costs.
We also develop forecasts of Renewable Energy Credit (REC) prices across multiple states. This analysis considers state-level Renewable Portfolio Standard (RPS) requirements over time, as well as potential federal renewable requirements, looking at the cost and geographic availability of several potential renewable resource types and incorporating the effect of in-state requirements and alternative compliance payments. Similarly, we also develop forecasts for carbon prices and other environmental compliance costs.
The electricity industry is currently faced with the challenge of analyzing and justifying their resource portfolio expansion plans in recognition of the economic impacts of current and potential future regulatory policy, as well as difficult questions about how rapidly new technologies will drop in price and be adopted by market participants. Such environmental considerations include renewable resource requirements, conservation initiatives, and carbon dioxide (CO2) emission constraints. Technology questions include how rapidly renewables will drop in cost, how much they will cost to integrate, how strongly they will be incentivized by state mandates, and how they will also be adopted at low voltage scale.
The Brattle Group provides economic analysis to develop integrated resource plans for utilities that consider generation options with varying degrees of exposure to market and regulatory risks, the optimal portfolio of contracts (power purchases), demand-side options, and transmission alternatives. Our experts are also on the forefront of renewable integration planning and the wide range of new and complex issues related to these resources.
We develop resource planning approaches and techniques that focus on uncertainty and risk as essential components of sound investment decisions and transparent communication with stakeholders. Our experts in the electricity industry have comprehensive skills in financial modeling, market analysis and forecasting; option pricing; decision analysis; and risk management. These capabilities are essential to providing clients with unrivaled support for regulatory proceedings in rapidly evolving energy markets.