Changing Electricity Economics

Updated: Dec 29, 2020

Online example shown below, based on 4 x 3-4 hour sessions.

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Course objectives – is this for you?

Are you ready for the new challenges & opportunities as power markets around the world evolve?

This is an essential course both for those generating and trading electricity and for those responsible for policy within the power industry.

It leads attendees through a clear, accessible and thorough examination of the economics of power generation, from power plant cost influences to end-customer prices. It contextualises this analysis with key consideration of industry drivers and trends, including increasingly liberalised and competitive markets, evolving policy support and management frameworks, the growth and integration of renewable power sources, and the restructuring of power systems towards more decentralised operations.


Session 1: Power project economics

The cost structure and returns of power projects

  • Project capital, operational and marginal costs

  • Comparing and contrasting electricity generation options (both conventional and low-carbon): the supply matrix from an economic perspective

  • Cashflow essentials: profitability, risks and returns on investment

  • Global vs local business case variables

  • Key trends, including the impact of competitive auctions and other policies

Investors, “bankability” and project financing

  • Equity, debt and “wacc” (returns, risk perceptions and the investor universe)

  • What really determines “bankability”?

  • The crucial impact of financing structure and the cost of finance on electricity prices

  • Subsidy vs. support: investors and the policy environment

  • Future risks for power projects, including stranded assets and curtailment

Session 2: Power system disruption and the economic impacts

A system perspective on electricity costs, prices and value propositions

  • Illustrating the calculation and limitations of simple metrics such as “levelized cost of electricity” (lcoe) (Examples using a lcoe calculator in Excel)

  • Other cost metrics available to policymakers and system operators

  • From power plant to customer costs: key contributions along the supply chain

  • Sources of renewable power integration cost (and options to reduce them)

  • Examining key power system trends and disruptions

Electricity markets and their prices

  • Selling energy: understanding wholesale markets and the “merit order”

  • Different timescales: day-ahead, spot vs real-time/balancing markets

  • Examples of the critical importance of peak demand to energy prices, price volatility and the changing economic of power plants

  • Weather forecast uncertainty and power prices

  • Demand-side drivers: demand-side response (DSR), efficiency and other impacts

Session 3: Creating value from capacity and flexibility

Revenue streams from power capacity

  • A question of timescale: valuing capacity from sub-second to years in the future

  • Grid “ancillary” services and market saturation risks: present and future

  • Examples of markets which monetize grid services such as frequency response and reserves

  • Examples of markets which monetize future supply security: capacity markets

  • Trends in the value of grid services and the implications for electricity prices

New business models from flexibility

  • Defining system “flexibility” and the matrix of available delivery options

  • Examples illustrating the growth of dispatchable renewable power projects

  • Applications of energy storage and the key economic considerations

  • “Aggregation”: examples and business models for clean power at different scales

  • Emerging power plant flexibility options, including hydrogen production

Session 4: Competition, innovation and the end-customer

Selling electricity in competitive environments

  • Decentralization (from consumers to “prosumers”) and its economic impacts on both conventional generators and the grid

  • Examples of market competitive structures and industry unbundling

  • Utilising smart meter rollouts for innovation in pricing, including time-of-use tariffs and other market differentiators

  • “Smart energy” bundling and “Energy as a Service” for both C&I and residential customers

  • Selling direct to business: corporate PPAs and price protection approaches

Growing and emerging challenges and opportunities in the electricity value chain

  • The impact of electric vehicles on electricity demand curves: bulk energy, peak power and “vehicle-to-grid” (V2G); (illustrated with simple calculations)

  • “Sector-coupling” and electrification, including power-to-gas

  • Localisation of the power system (including microgrids and local or peer-to-peer electricity trading)

  • Aggregation and “virtual power plants” (VPPs)

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