How LCP specialists delivered bottom-up modelling of the electricity market to assess investment dynamics in a reformed energy market.
& CfD advice
The increasing share of renewable and low carbon sources, incentivised through market subsides, has led governments around Europe to introduce capacity markets.
Capacity markets are required to ensure that an adequate level of capacity is available in the future to keep the lights on.
In Great Britain, Capacity Market and Contract for Difference (CfD) auctions have been introduced through the Electricity Market Reforms (EMR). The introduction of these policies has altered the nature of investment, and understanding and forecasting auction outcomes is now a key driver for the success of investors.
How we can help
We have extensive experience of both the capacity market and CfD regime. We have provided the model used to set the capacity target for each auction, the model used by the CfD counterparty to determine supplier charges, and models which have supported design decisions for both schemes. Using this experience, we support a wide range of industry participants including independent generators and energy suppliers throughout each stage of auction participation, from pre-qualifying assets to understanding the effect on portfolio profitability.
We can help our clients:
- Understand the requirements for participating in the capacity market or CfD regime
- Understand how the schemes will evolve over time and the effect of the ongoing changes to their design
- Provide projections of how generating assets could be affected, including the impact on the wider energy market
- Understand the impact of the ongoing changes to the market design
- Develop strategies to minimise and manage penalty risk
- Incorporate Capacity Market and CfD modelling within the client internal modelling framework
Our models are updated regularly to ensure they reflect the latest policy and market developments. Our recommendations are the result of tailored modelling solutions and in-depth understanding of government policies.
How we have helped our clients
How LCP specialists helped the UK government quantify the risk of power blackouts.
How LCP specialists supported Ofgem in the review of complex transmission charging arrangements models.
How LCP advised RWE on the impact of the auctions on their generation portfolio and on wider market variables.
Our Capacity market & CfD advice experts
Explore our solutions
Developing bespoke modelling solutions to supplement in-house analysis to suit the client’s needs.Discover more
From projections for individual power plants to assessing market scenarios for wholesale prices, security of supply and emission analysis.Discover more
Insight into how the changing policy environment can impact businesses and evidence-based recommendations to address policy uncertainties.Discover more
Evaluation of investment decisions taking into account all aspects of the energy market.Discover more