ArrowHead Solutions – Power and Environment

ArrowHead Solutions Help Clients Understand Future Power and Emissions Markets to Aid Their Decision Making

ArrowHead Power and Environment Solutions Help Clients Understand How Potential Market Events Impact Their Businesses

ArrowHead electricity and environment solutions include helping clients to understand specific power and environmental industry issues and how these issues impact their businesses.

Many of these issues are related to commodity price, such as:

  • What will power prices be at key locations worldwide over the next 40 years? How does this split into a “capacity price” and an “energy price” if there is a capacity market? How are capacity and energy prices related?
  • What is the price of a renewable energy credit (REC) going to be? How does natural gas price influence REC price? How about coal price? Power demand? How about the capital cost of renewables like wind, solar, geothermal, or waste? What actually is a REC price? How does it get formed in the market? (Where does REC price come from, and how is it formed from fuel and power markets?) What is the right REC price to use in evaluations of power purchase agreements? What is the right REC price to use in renewable project pro formas? What’s the right number? How vulnerable is our company to changes in green policy? How much upside/downside will our company get from various green policies? How do RECs trade and revalue interregionally? Can we buy or sell RECs in contiguous regions and meet needs or save money? Will our company be able to get the RECs it needs at reasonable prices? Is producing renewables and RECs a profitable business?
  • What is the price of a RIN going to be? From Brazilian ethanol to biodigestion of organic material in the United States, how does the market determine the price of the associated RIN? Where do RIN prices come from? How much can a refiner expect to pay for requisite RINs? Will he still make money after paying that, or does it erode his margins? If crude price goes up, what happens to RIN prices? What if crude prices drop? How much money can a biodiesel project truly get from its RINs? Are the biodiesel RINs enough to make or break the project? RINs can be traded against RECs in markets, and that creates arbitrage opportunities for green projects. Is it best to take your money as a REC or as a traded RIN? Should you hedge your RINs in REC markets, or vice versa?
  • What will emissions allowance prices be? What is the price of an SO2, NOx, CO2, mercury or particulates allowance going to be in all the regions of the United States? Using SO2 as an example, what determines SO2 allowance price? What if gas price is low? High? What if coal price drops? What if nuclear plants are shut down over time in response to the perceived Fukujima dangers (as Germany, Canada, and others have suggested)? How sensitive is the allowance price to the total number of allowances allotted? Does it matter whether allowances are assigned or auctioned? How? What is the full probability distribution over allowance price? Will the allowance prices ultimately decommission coal? When? Where? How fast? What will that do to power prices, both absolutely and relative to coal and gas prices? Do emissions regulations raise or lower REC prices? How much? Which direction? What are the correct SO2 prices to use in profitability pro formas, and similarly for NOx, mercury, CO2, and/or particulates? How will these prices vary in the face of alternative local, state, and federal regulation? Cap and trade? Emissions tax? Point source regulation? BACT-MACT? Understanding and using emissions prices determines to a great degree the right generation expansion, operation, and retirement policy.

Power and Environmental companies also need help with specific types of issues or decisions, such as:

How ArrowHead Power and Environment Solutions Help

ArrowHead consultants use the Arrowhead Power and Environment Model and other integrated ArrowHead Models to calculate probability distributions over prices and quantities across the decision time frame our clients need. Clients can have us use our assumptions and probabilities, or their own. It is easy to adjust models to reflect any of the conditions or events reflected in the types of issues presented above. Then in a single model run using probabilities for each of the market assumptions or issues that must be explored, the models calculate the probability distributions over prices and quantities (for power, emissions, and energy credits, needed to answer the questions and issues. Not only does the model provide an accurate representation of market behavior under the various assumptions, but it also accurately applies the calculations for the various probabilities in an integrated fashion in a single run. Our power and emissions market specialists can also help clients analyze the model results and apply the model results to helping make a specific decision or to understand how certain events would impact the power, emissions and energy credits markets and as a result their businesses.