With the introduction of renewable energies and the acceleration of decarbonisation efforts, such as hydrogen and ammonia, carbon capture, utilisation and storage (CCUS) and storage batteries, electric power business opportunities are expanding. On the other hand, further deregulation and the growing complexity of the marketplace have brought about new changes along with decarbonisation, making it increasingly challenging to predict future electricity prices.
At PwC, we support our clients engaged in new business opportunities in the supply-and-demand balancing market and long-term decarbonising power capacity auctions by utilising our in-house models. We offer analyses of Japan’s future electricity prices and power curtailment volumes with renewable energies and evaluate their feasibility.
Electric power plants are normally expected to operate for decades, and it is critical to assess their cash flow projections at the time of investment. At PwC, we use our in-house models to make long-term predictions of market prices through 2050-2060 to assist our clients’ decision making on power sales mechanisms, estimated revenue streams in various markets and risk analysis.
| Wholesale electricity market prices |
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| Power curtailment rate (supply-and-demand balance and grid constraints) |
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| Supply-and-demand balancing market prices |
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| Optimal operation of storage batteries |
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| Non-fossil fuel energy certificate prices |
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| Capacity market prices |
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| Profitability analysis for grid-integrated storage batteries |
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| FIP income analysis and support for long-term decarbonisation power capacity auctions consideration |
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| Future feasibility studies for various power sources |
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| Fair value assessment |
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Our professionals at PwC have extensive experience in supporting equity and debt finance and M&A with various power generation and retail power projects, both in Japan and abroad. Furthermore, given our comprehensive knowledge in income prediction and risk analysis, by performing detailed quantitative assessments using models, we can appropriately evaluate the feasibility of any opportunity.
| Client | Purpose | Services |
| Electric power company | Consider investment into a renewable energy project | Forecast wholesale electricity prices and power curtailment rates (supply-and-demand balance constraints) |
| Electric power company | Consider investment into a wind power project | Forecast wholesale electricity prices and power curtailment rates (supply-and-demand balance and grid constraints) Analyse FIT income |
| Power generator | Consider investments into renewable energy projects (with storage batteries) | Forecast wholesale electricity market prices and power curtailment rates (supply-and-demand balance constraints) Analyse FIP income analysis/consider storage battery integration impact |
| Power generator |
Structure a corporate PPA | Forecast demand-side power prices, including wholesale electricity market prices, non-fossil fuel energy certificate prices, wheeling charges and renewable energy charges, etc. |
| Power generator | Consider bidding for an offshore wind power project | Forecast wholesale electricity market prices and power curtailment rates (supply-and-demand balance and grid constraints) |
| Trading house | Consider investment into a grid-integrated storage battery project | Forecast wholesale electricity market prices, supply-and-demand balancing market prices, optimal operation of storage batteries and capacity market prices |
| Trading house | Consider electric power business strategies | Forecast wholesale electricity market prices, non-fossil fuel energy certificate market prices and capacity market prices, and evaluate impact of storage battery diffusion when carbon neutrality is achieved in 2050 |
| Financial institution | Develop market entry strategy for non-FIT renewable energies, grid-integrated storage batteries and microgrids | Forecast wholesale electricity market prices, supply-and-demand balancing market prices, storage battery optimisation and capacity market prices Shortlist partner candidates and estimate business feasibility |
| Financial institution | Consider investments/loans to fossil fuel power plants | Forecast wholesale electricity market prices |
| Manufacturer | Consider strategic bid prices for solar power generation equipment trading | Forecast wholesale electricity market prices and power curtailment rates (supply-and-demand balance constraints) |
| Manufacturer | Consider strategies for green energy procurement and renewable energy investment | Forecast demand-side power prices, including wholesale electricity market prices, non-fossil fuel energy certificate prices, wheeling charges and renewable energy charges, etc. |
At PwC, we use our own in-house fundamental models in analysing future power markets. By building a database of information about electric power plants across the country and calculating supply capacity and demand matching, we estimate hour-by-hour marginal costs (i.e. for electric power plants operating at that hour with the highest variable costs). Simultaneously, because the availability of power generation is determined for each plant, we also compute curtailment rates for renewable energies based on supply-and-demand balance constraints.
The model is capable of area-by-area analysis as per the electric power companies’ service areas (i.e. nine regions excluding Okinawa). Scenarios about renewable energy volumes, nuclear power capacity factors and fuel costs may be customised.
We support business strategy development by evaluating the profitability of renewable energies and storage batteries, forecasting long-term decarbonisation power capacity auctions and assessing for fair value based on the electricity market’s supply, demand and price data. When considering optimal operation of storage batteries, we perform detailed analyses using such inputs as future market price forecasts and an operation optimisation model (MILP) that takes into account operational constraints.
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Partner, PwC Advisory LLC
Partner, PwC Risk Advisory LLC
Partner, PwC Advisory LLC
Senior Manager, PwC Advisory LLC
Director, PwC Advisory LLC
