Insights Into Regional Power Markets: BCG’s Power Generation Model

BCG’s power generation model provides a detailed look at key factors that affect wholesale regional power markets, supporting strategic planning and investment decisions.

A comprehensive understanding of the factors influencing local wholesale power generation markets is vital to power producers’ ability to optimize their short-term operating efficiency, as well as their medium- and longer-term strategic planning. It is also a critical enabler of the identification of trends in the market and the identification and evaluation of investment opportunities.

BCG’s power generation model provides a highly detailed look at these markets. Its lens spans a wide range of variables, including ones relating to demand, supply, generation mix, transmission, and commodity prices. Some of these variables include:

  • Projected electricity demand, including hourly profiles and long-term growth, to 2030 or 2040
  • Projected plant dispatch on an hourly basis over the short, medium, and long terms
  • Generation mix under different scenarios
  • Long- and short-term commodity-price scenarios
  • Technical plant specifications, including constraints and frequency of outages, based on historical data and benchmarking

Meeting Demand Cost Effectively

The model incorporates these and other variables, as well as all other relevant technical and economic constraints, and yields information that can help power generators determine how to meet demand most cost effectively, whether it be in the near, medium, or longer term. This information includes optimal plant dispatch, such as volumes and marginal costs; hourly wholesale electricity prices by country or region; and grid volumes.

The model also helps generators assess the profitability of their production fleet in the short and long term and analyze buying and selling opportunities. And it identifies potential long-term portfolio-optimization measures, including new construction or the shutdown of plants, based on the economics, providing valuable support for strategic decisions on portfolio investment.

Additionally, the model allows operators to engage in sensitivity analysis—that is, seeing how a change in a given variable or disruptive market forces might affect the economics of an operator’s portfolio, the overall power system’s price dynamics, or the outlook for different generation types and mixes. This ability to permit scenario planning and analysis is a central component of the model’s value.

BCG has developed a base-case scenario for Europe’s EU28 interconnected power system. (The model can be built and customized for individual countries both within and outside Europe.) The scenario’s projection, which extends out to 2030—and for some markets 2040—is based on a series of assumptions about commodity prices, weather conditions, the speed of buildup of renewable energy sources and storage, the decommissioning pace of fossil fuel and nuclear plants, and other variables. It can serve as a useful “first look” for European operators starting to engage in longer-term planning.

Power & Utilities