Replacing coal-fired units with alternative forms of lower carbon plant is critical to ensuring decarbonisation of the sector in the long term. Whilst markets are transitioning at differing rates driven in part by legacy infrastructure and local resources, environmental legislation is putting pressure on older, thermal plant.
Developers and investors in new gas-fired generation are facing a paradox. The mid- to longer-term requirement for new gas-fired generation is clear. However, current prices do not justify new investments.
Although spark spreads are expected to recover as demand picks up and plants close under the LCPD and IED, there is uncertainty around the impact of renewables on prices. This conundrum has led some governments to introduce capacity mechanisms to help make returns more stable for fossil-fuelled generators and to secure funding for projects.
We advise sellers and buyers of combined cycle gas turbines (CCGTs), as well as investors in new plant, on potential earnings and market risks. Using our market and asset models, we analyse in detail the revenue streams available to gas-fired generators in wholesale, capacity and ancillary services markets. We assess the risk implications of different contracting strategies, from merchant operation to tolling style arrangements.
After the acquisition or commissioning, we advise clients on operating models, performance improvement, plant optimisation and risk measurement.