Contact information

SKM Market Predictor Tel: +47 73 80 58 00
Fax: +47 73 80 58 01

Viktor Balyberdin СЕО
Mobile: +47 99 59 59 09

Kurt Sveggen Deputy CEO
Mobile: +47 90 95 30 44

INVESTMENT ANALYSIS AND RISK ASSESSMENT

SKM Market Predictor is a leading supplier of long-term power and elcertificate market analyses. The analyses are tailored to meet the needs of investors or anyone who needs or benefits from long-term prices and market development. Over the years, SKM Market Predictor has built up a comprehensive analysis service, extensive experience and knowledge of the power market and the most important price drivers as well as complex analysis models. This enables us to provide expanded and customised analyses. Therefore, SKM Market Predictor is an ideal partner in making correct decisions on investments, mergers, acquisitions and sales of assets and power production. 

This page outlines the main services focusing on the investment analysis and risk assessment SKM Market Predictor is providing to the existing and new customers evaluating and investing in the Nordic power market.

Overview of the Nordic power market

The Nordic power market area currently covers seven countries which are Norway, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania. Furthermore, some countries are divided to several spot market areas, so in total, there are 15 spot areas with limited transmission connections between them. Consequently, it can make a significant difference where a power plant or consumption unit is located. In some areas, spot price is almost entirely driven by hydropower availability, while in some other areas thermal power plants or wind mills play a significant role in price formation. In the long run, also investments in new production, consumption and transmission capacity have a large effect on the price development. SKM Market Predictor is constantly following such changes and is able to analyse their effects in short and long term. Therefore, we are able to offer valuable insights concerning the strengths and weaknesses of various investment locations in the market area.

Capture rate

Due to increasing intermittent wind and solar power production, volatility of power prices will grow in the future. As the production of a wind power plant correlates strongly with the production of other similar plants, the average power price for wind power will decrease over time as the market share of wind power increases. The same phenomenon is even stronger for solar power which can already be seen in the German power market. We use the term capture rate to measure the value of intermittent power production compared to average power production. We have also been able to show that these values are already clearly below 100 % and the trend downwards is continuing. Consequently, we have analysed the future change of the capture rate in different Nordic price areas. We can help you to take the decreasing capture rate into account when planning investments for wind or solar power capacity.

Asset valuation

The interest in either selling or leasing assets or selling the production for a period is increasing in the Nordic power market. Similarly, there is also an increasing interest on the buyer side, and especially from external investors. In addition to the technical details of an asset, the potential for earnings will be decisive for the valuation. In this context, current uncertainties must be considered taking into account both the geographical location and capture rate. Any fiscal and legal obligations as well as insurance contracts that apply must be considered.

Stochastic wind

Wind power capacity has increased in recent years, both in the Nordic and in the Central European power systems. This trend will continue in the coming years and when combined with the plans to increase transmission capacity between the markets, it will increase the volatility of prices considerably. We will help your to cover the uncertainty connected to increased intermittent production and volatility of the power prices. We use stochastic wind power modelling based on historical wind data. Simulation with stochastic wind provides better physical modelling of wind power variations and therefore more accurate understanding of both power flow and price variations.

Risk analysis and assesement

Any trade involving either renewable or non-renewable production is associated with risk. The increasing price volatility combined with the relative low price level compare to the LCOE leads to a necessity to evaluation of major risks connected to investment. Annual variation of Nordic inflow affects the production volume of hydropower plants as well as market prices. The share of wind power in a production system largely affects volatility in market prices. Also, variations in thermal and carbon prices as well as various climate policy measures, increase the risk of the investment. With risk analysis, we can help you to define the impact of the most critical variable to the valuation of your trade. We can also help you to find the thresholds to the most important variables in your asset valuation and provide a complete risk evaluation taking in consideration major uncertainty elements.

The additional services are offered as a consultancy assignment where price and other terms are agreed between the parties.

For further information please contact:

Svein Nyland
Director
Tel: +47 95 25 22 19

Juha Turkki
Senior Advisor
Tel: +358 45 346 1925