ESAI Power’s forecast methodology is based on fundamentals. We keep a close eye on forward curves and granular, detailed transactional activity. We are always prepared to explain why our fundamental view may be different from forward curve quotes or specific transactional activity in the capacity markets for example. ESAI Power’s long-term market forecasts are differentiated versus other forecast services on the power markets as a result of our four key strengths.
When forecasting the supply curve, particularly the granular details on generation projects in the queue, upcoming retirements, and projects at-risk of retirement really matter. Our deep understanding of PJM, NYISO, & ISO-NE and our clear and transparent presentation of our forecasts, underlying assumptions, and market dynamics helps companies clearly understand the range of likely scenarios to inform their investment or trading decisions. ESAI Power provides annual and monthly granularity (on- and off-peak, 7×24) in our reports and published outlooks. We can provide hourly granularity if needed but there could be limitations to the usefulness of hourly data from our models depending on the application which we would be happy to discuss.
Detailed Fundamental Inputs
ESAI Power projections are based on a high level of detail in our fundamental inputs. Our energy models compute annual prices on an 8760-hour basis under full security-constrained dispatch, like the ISO models.
- Heat Rate, Output Specs & Transmission Grid Constraints Our models include all details that impact prices on the grid. For example, every generator has heat rate and output specs (and others) that have been vetted for accuracy against past reported performance. The transmission grid representation and constraints are all accurately modeled (can provide both zonal & nodal detail).
- Gas Basis Pricing & Emissions Costs
Additional inputs that impact generation costs are developed in-house. For example, we project gas basis pricing at approximately 15 locations in the Northeast. We also model emissions costs (e.g., CO2, SOx, and NOx) that affect generator bid profiles.
- Detailed Generation Project Outlooks
One aspect of our research that is unique is our Project Evaluation Program (PEP). We provide outlooks in an excel database for the probability of completion for all generation projects in development and under construction in PJM, NYISO, and ISO-NE, including all renewable projects. Retirement outlooks are also included. The bottom line is that our fundamental outlooks are based on a very high level of detail with attention to accuracy.
Assessment of Risks
We publish base case outlooks based on assumptions that, based upon our experience, are the most probable outcomes. However, there are many risks on the horizon that can alter price outcomes. ESAI Power can assist with assessing these risk outcomes via our analyst access service to entertain questions and impacts of changing assumptions or building out sensitivities cases as part of an advisory or consulting project.
Transparency of Forecast Assumptions
We are not a black box in terms of our thought process. We ensure the assumptions behind our outlooks are always clear, available, and well-presented in our research reports. This allows clients to agree/disagree with the assumptions and weigh the impacts on the pricing. We help clients with sensitivities if needed.
For example, we may assume that a lot of offshore wind will get built in NYISO, whereas the client’s internal outlook may deem that very little will get built. We can help bridge the gap on pricing outcomes between these two outlooks for offshore wind. In contrast, many national forecast providers have forward curves that are just market quotations based on the bids and offers of market participants and therefore, the assumptions behind the forward curves are opaque.
PJM, NYISO, ISO-NE Expertise
Our team has a deep knowledge of the New England, New York, and PJM power markets, having focused on these ISOs for many years. We understand the nuances of market rules and regulations and how changes will affect price outcomes.
ESAI Power’s senior analysts have been involved in the Eastern U.S. power markets since the start of deregulation 20 years ago.
Our quarterly reports provide detailed overviews of current market dynamics and upcoming changes that could change pricing outlooks. This is backed up by direct ‘analyst access’ where clients receive additional color on market outlooks similar to what was presented in ESAI Power’s recent Goldman Sachs Capacity Markets Webinar.
Our Research Methodology
Energy Asset investment and power trading decisions should always be based upon fundamentally sound inputs and detailed project outlooks. While the demand side of the equation for energy asset valuations and energy pricing is relatively straightforward, getting the supply side data correct relies upon a detailed and accurate understanding of construction of generation projects, the likelihood of project completion, and energy asset retirements and those at-risk of retirement. Supply forecasts also require a broad understanding of how transmission, congestion, emissions, and renewable energy mandates impact capacity and energy price outcomes.
Our Long-Term Forecasts Publications
ESAI Power’s coverage of the Capacity markets is lead by our flagship Capacity Watch report. This publication is counted on by wholesale power market participants as the forward curve to inform your investment and business decisions. Visit our Capacity page to learn more about our Capacity Watch publication.
ESAI Power’s Energy Watch Quarterly report includes reviews of market conditions, granular forecasts of pool-wide and zonal energy pricing, fuel input forecasts, policy changes, and how these impact energy prices and generator spark spreads looking forward. Visit our Energy page to learn about our Energy Watch Quarterly publication.
ESAI Power’s Renewable Energy coverage includes solar, wind, hydroelectric, & storage. We outline regulatory and market factors that impact the supply and demand balance for Class I RECs and project the supply & demand balance forecast for the next decade. Visit our Renewable Energy page to learn about our Renewables Watch publication.
ESAI Power analyzes Transmission proceedings before FERC & State PUCs with a specific focus on FERC Order 1000, competitive transmission development, public policy on transmission, and expansion required to meet renewable and clean energy goals. Visit our Transmission page to learn about our Transmission Watch publication.
To monitor Emissions, ESAI Power closely follows existing regulations at the federal, regional & state level and analyze the potential impacts on emissions markets. Our analysis includes price projections for SO2 and NOx (annual and seasonal) allowances. Visit our Emissions page to learn about our Emissions Watch publication.
Energy Asset Database – Provides an outlook for construction of generation projects and plant retirements in ISO-NE, NYISO & PJM. Each project is assigned a “probability of completion factor in % terms” that is then applied to develop a forward assessment of likely capacity additions and retirements in each pool. The database is published quarterly and includes project by project level details such as project status, queue numbers, project name, developer permit status, financing status, PPA status, etc.
Order Your Free Trial Research Reports
Please fill in your contact details, check the box(es) on the right to indicate your preferred complimentary research report, up to a maximum of 3 reports and if you have any comments.
If you have any questions about our free trial process, please contact Tom Bausemer on (781) 460-1227 or [email protected] to order your free trial report.
*Project Evaluation Program (PEP) database with detailed evaluation of generator projects under development and at-risk of retirement not included in free trial for Capacity Watch. ESAI Power grants free trials at its sole discretion. Note: the PEP product can be viewed on a demo basis over zoom or teams. Corporate policy is not to grant access to our most recent reports during a free trial.