The ESAI team is especially well qualified to provide power market analytical support. With our extensive experience forecasting power and natural gas prices and modeling the Northeast power pools as well as many generation assets, ESAI is conducting direct market research daily. We regularly and closely follow market and regulatory/policy issues in each of the relevant regions. Through monitoring of and participation in stakeholder processes at each of the Northeast RTOs, as well as FERC proceedings, we maintain a view on the potential for key changes to market rules and the potential for regulatory risks to market prices and asset values. Having also been deeply involved in several recent and current transaction processes, ESAI has gained additional insights about specific details in each of the markets, along with advanced perspectives on potential investment theses and risks in the Northeast RTOs.
The basis for our analytical work and market assessments in support of our clients is ESAI’s routine market updates and forecasts. ESAI maintains and regularly updates short, medium and long-term, fundamental market outlooks and price forecasts for the key hubs and zones in the Northeast energy and capacity markets to support both our syndicated research products and consulting work. Our power market publications (e.g. Northeast EnergyWatch™, Capacity Watch™, Transmission Watch™, Congestion Watch™, etc.) are produced and updated on regular basis. Thus, we have well-established, calibrated models and databases readily available for detailed assessments. We also have detailed historical databases and extensive expertise with the key factors that have shaped market outcomes, power and gas prices, and generation asset performance over the last 15+ years. The market intelligence, model calibration, and regular data collection and updates that support our base case market outlooks provide a solid basis for the analysis we conduct. Starting from this modeling framework, ESAI incorporates market assumptions and details related to the markets in order to provide detailed analytics for the markets covered.
ESAI can provide overviews of key fundamental drivers for the markets, an assessment of key regulatory and market rules issues, the associated risks and uncertainties. ESAI also provides detailed overviews of the structure and design of each of the pools in question and a review of the historical development and market outcomes for each relevant pool over the past 15 years. This overview and historical perspective helps illustrate the most important fundamental and regulatory drivers and highlight how the market risk and drivers of asset values have changed.
There are several factors that distinguish ESAI’s team and our offerings which allow us to cost-effectively provide key insights and forecasts to support parties and contribute to successful and collaborative working relationships:
- Unmatched expertise and experience with market analysis and regulatory assessments in the markets of interest. ESAI’s team has been following both the Northeast markets since they were launched more than 15+ years ago. ESAI experts have experience working with all New York City generation owners in a range of different contexts, from asset valuation to strategic planning and regulatory support. ESAI has also been deeply involved supporting participants across the entire PJM footprint. ESAI experts have participated in the development of the PJM capacity market rules and have a deep understanding of past market developments and the expected impact and key uncertainties associated with PJM’s proposed implementation of Capacity Performance rules. In New England, the experience is equally deep and broad.
- The ESAI team’s collective experience with modeling LMP markets and monitoring and forecasting long-term energy and capacity prices, including on a routine basis through Northeast EnergyWatchTM and Capacity WatchTM;
- The cohesiveness of our team and the involvement in the project of multiple experts and support staff, allowing a broader set of views and insights, as well as solid coverage allow us to be responsive to clients’ needs and schedule;
- A solid base of data and knowledge related to key factors driving market fluctuations, such as: generator additions and retirements; transmission projects and outages; Demand Response (DR); impact of compliance with environmental regulations on the generator stack; generator outages; demand patterns; fuel pricing; natural gas basis issues; and regulatory insights and risk;
- Multiple analytical tools for energy, capacity and congestion analysis, including the AURORAxmp nodal production cost model and the Power World optimal power flow simulation tool;
- Recent experience with several market issues that are critical:
- Evaluation of shale-driven gas basis and potential gas price advantages for new gas-fired CCGTs and the relative competitiveness of coal-fired generation, as well as the timing and impact of pipeline upgrades (e.g., Constitution, AIM, Atlantic Sunrise) that are expected to reduce basis differentials.
- Detailed evaluation of planned and proposed transmission upgrades in each of the markets. For example, we have performed extensive detailed analysis of transmission upgrades in New York that will affect congestion within Zone J (including constraints on Staten Island, affecting the Linden Cogen), between zones F and G, and across the Central-East interface. ESAI has also assessed the impacts of transmission upgrades underway or planned for the PSEG zone.
- Detailed analysis of each of the northeast capacity markets, including the implementation of the G-J locality in the New York market, as well as the recent forward auctions in both PJM and ISO New England. ESAI has followed closely and advised multiple clients on the critical issues facing the PJM and New York capacity markets currently, Capacity Performance rules in PJM and proposed changes to the buyer-side mitigation rules for NYISO.
- Evaluation of longer-term market drivers, such as carbon policy and pricing, new build economics and the cost of new entry, and the potential for and barriers to pipeline and transmission infrastructure build out.