The Energy Edge model determines balances between supply and demand for energy markets over the next few decades.
Growth in demand is extrapolated by looking at possible population and GDP growth rates and realistic demand destruction options (such as efficiency measures and embedded generation) and linking these factors to model likely demand over the next few decades.
On the other side of the equation, we can look at the current and contracted generation capacity, along with scheduled closures, to determine the likely capacity gap. The challenge, then, is how to close the gap.
CLOSING THE GAP - DESCRIBING A RATIONAL MARKET OUTCOME
Energy infrastructure builders will use a number of tools to determine how to invest in capacity needed to close the future generation gap in the EU. To the simplest approximation, investors will maximize net present value over the lifetime of the plant; however, equally important factors such as investment uncertainty and the need to diversify portfolios as well as security of supply, the constraints and incentives provided by regulation, and the possibility of shocks in such factors as carbon and fuel prices and capital costs will all play a role.
The Energy Edge energy model is an interactive tool designed to allow the user to take apart the assumptions that drive possible build and price regimes in order to generate scenarios for understanding the markets and to test these scenarios for self-consistency.
WHY DO THIS? WHAT CAN BE ACHIEVED
The Energy Edge model differs from many of the conventional market studies and forecasts produced in several ways:
• Often, such studies tend to describe the world in terms of a variance between “low” and “high” scenarios. Using our model, you are free to develop a more in-depth view of the outcomes and assumptions lying between and beyond the "low" and the "high".
• As methodology and in some cases assumptions are often hidden, studies or reports can serve as static documents. Working with Energy Edge, you can see and, more importantly, vary the variables and assumptions, making the product fully transparent.
EXAMPLES OF WHAT WE CAN OFFER
• For developers of carbon neutral generation technologies, we offer a means to assess likely returns on investment by developing electricity markets price outlooks, allowing you to test and unpack assumptions on returns to investment for renewables and nuclear power.
• In commodity markets, such as coal and gas, our model can help you develop a robust, demand-driven outlook on prices, volume, and more.
• Iterative scenario-playing, where your questions about possible developments in the market are answered by Energy Edge in a way that allows us to turn around and challenge them with other possibilities and scenarios and thus avenues for our study
• Feeding challenging content and avenues of approach into regular briefings for you or your clients.
Working with you, we can combine a tool for obtaining the outcomes of possible decisions with the vision to conceive of the decisions which could possibly be made in order to “war game” scenarios. If you would like to talk more about the Energy Edge Power Markets model and its applications, please contact Linus Adler today.