Power Market Analytics: Evaluation of future prospects for the electric power industry through market analytics

Support for feasibility evaluation of various electric power projects

Electric power plants are normally expected to operate for decades, and it is critical to assess their cash flow projections at the time of investment. At PwC, we use our in-house models to make long-term predictions of market prices through 2050-2060 to assist our clients’ decision making on power sales mechanisms, estimated revenue streams in various markets and risk analysis.

Future market forecasts based on prediction/optimisation models

Financial modelling/strategy development based on prediction results

Building proprietary models

At PwC, we use our own in-house fundamental models in analysing future power markets. By building a database of information about electric power plants across the country and calculating supply capacity and demand matching, we estimate hour-by-hour marginal costs (i.e. for electric power plants operating at that hour with the highest variable costs). Simultaneously, because the availability of power generation is determined for each plant, we also compute curtailment rates for renewable energies based on supply-and-demand balance constraints.

The model is capable of area-by-area analysis as per the electric power companies’ service areas (i.e. nine regions excluding Okinawa). Scenarios about renewable energy volumes, nuclear power capacity factors and fuel costs may be customised.

We support business strategy development by evaluating the profitability of renewable energies and storage batteries, forecasting long-term decarbonisation power capacity auctions and assessing for fair value based on the electricity market’s supply, demand and price data. When considering optimal operation of storage batteries, we perform detailed analyses using such inputs as future market price forecasts and an operation optimisation model (MILP) that takes into account operational constraints.