Unprecedented insight into risk factors offers comfort for energy investment decisions in Europe

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The landscape for energy investments has changed dramatically in recent times. Global economic conditions make energy an attractive proposition for a wide investor pool, putting pressure on potential investors to offer more competitive bids. At the same time, maturing technologies and economies of scale are leading to the reduction and possibly elimination of subsidies for renewable energy. This puts price pressure on all energy assets, and exposes new projects completely to the dynamics and merchant risk of the open market or makes them seek certainty via (corporate) Power Purchase Agreements.

Supporting energy investment decision makers
To help investors developers and corporate off-takers in the European energy market feel more comfortable in their decision making, DNV offers power price forecasts for European countries. These forecasts support your investment decisions by predicting monthly average generation weighted prices per asset class and detailing the drivers and sensitivities that could impact your return on investment. Each forecast covers:

• Spot power price development
• Generation weighted price per asset class
• Generation mix of selected country
• Understanding and background of the (market) developments
• Insight in the market drivers and sensitivities
• Market dynamics with connected countries
• Transparency on the used assumptions

A single, shared vision
We offer a forecast that gives all stakeholders a consistent basis for negotiations. Forecasts are derived from our detailed simulation model of the European power market to ensure that each forecast accounts for the extensive interconnectivity of power systems in this region. Our European Market Model is based on the global scenario outlines in our Energy Transition Outlook, our vision of the most likely future of the energy market based on expertise across the DNV group and thousands of interviews with key stakeholders.

Dynamic market risks for Power Purchase Agreement pricing
DNV is the first advisor to extend its standard power price forecast with targeted insights for corporate off-takers and developers who are planning to sign a Power Purchase Agreement. As these parties are exposed to dynamic market risks, a single year average price for electricity is insufficient to make decisions on how to price energy under a PPA. In addition to the above standard scope, we offer a quantitative assessment of the future market risks related to the uncertainty in weather resource, imbalance price variability and cannibalization effects. 

Evaluating the level of uncertainty expected for these key determining factors helps investors, developers and corporate off-takers to address merchant risks in their Corporate Power Purchase Agreement. Understanding the joint effect of these factors allows to come up with a hedging strategy based on a true price of electricity. Check DNV's unique PPA pricing service offering for a further description.

Updates
To help ensure reliability, we regularly review past projections against historical wholesale price development, improving our simulations and resulting forecasts where necessary.

In-depth understanding of risk
True comfort in your investment decisions comes from a thorough understanding of the risk landscape for the specific project. To help you develop that understanding, our forecasts are supported by in-depth reports on the market drivers and sensitivities for the country/ countries where the (portfolio of) asset(s) is located. For an even deeper understanding, you can opt for an interactive workshop on the fundamental elements of wholesale price formation in your market including those drivers and sensitivities.

A forecast with built-in trust
DNV is the due diligence partner of choice for players throughout the energy sector. Combining deep technical knowledge and global engagement in all areas of the energy industry with market understanding and regulatory know how, we have been providing tailor-made electricity market modelling and forecasting services for over twenty years. In recent history, we have advised in hundreds of due diligence projects, significantly reducing the investors’ risk position.