Data & analytics solutions

Insight 23 January 2013

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Report summary

This insight focuses on regional power price drivers and outlook, highlighting the increasing relevance of a three-part power price forecast, recently introduced by Wood Mackenzie in contrast to a traditional two-part forecast.

Summary
Three-Part Price Forecast
- Energy Price Outlook and Implied Heat Rates
  - Eastern Interconnect and ERCOT
  - Western Interconnect
  - Scarcity "Risk"
  - Capacity Markets
    - New England Forward Capacity Market (FCM)
    - MISO Resource Adequacy Requirement (RAR)
    - PJM Reliability Pricing Model (RPM)
    - NYISO Installed Capacity Requirement (ICR)
- The Economics of Gas
Conclusions
- Overall pricing levels expected to vary significantly across markets
- Power price drivers continue to vary across markets
- Continued evolution of power markets complicates price forecasting

Tables and charts

This report includes 7 images and tables including:

Figure 1 Three-Part Price Forecast by component
Figure 7: Three-Part Price Contribution to Average 2015 Spark Spread for Selected Markets
Figure 2: Power Prices and Heat Rates - East and ERCOT

Figure 3 Power Prices and Heat Rates - WECC
Demystifying Power Prices - A Three Part Outlook: Table 1
Figure 5 Capacity Price Forecast for Select Zones
Figure 6: Overall pricing levels as a percentage of cost of building new gas plants