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Impact of investment scenarios

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William Plank

I am looking to analyze the impacts of several investment options into new power generation assets. This includes a comparison of various rate scenarios with calculated impacts on wholesale costs, generating resources costs and consumer savings/costs. I am having an issues in determining the best avenue to model the impact of these scenarios.

Initially I will run a different impact based on each scenario and rate sensitivity and compare the results to determine how they differ. My issues arises when I examine how best to input this data into the model. My input options include capital investment dollars, wholesale cost of power, total cost, margin, and impact to customer bills in aggregate. 

I am considering modeling the value of the investment as an output event, in combination with the wholesale cost as industry contribution and customer impact as an income event. My concern arises when I consider that the base case values in terms of wholesale cost and bill cost are always higher than the alternative scenarios. This methodology may be flawed. Would it be more beneficial in examining the impact solely looking at capital investment, and the change from base case for wholesale cost and customer cost?

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    Michael Nealy

    Hello William!

    Without having any additional information on your inputs, project setup, results, etc. it is hard to know for sure why your base case values are consistently higher than alternative scenarios. However, it would seem that the last methodology you outlined would be best: examining the impact solely looking at capital investment, and the change from base case for wholesale cost and customer cost.  

     

    Hope this helps,

    Michael Nealy

     

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    William Plank

    Michael, 

    This is very helpful. My impact results in a lower value under the alternative scenario due to reductions in spending by the utility industry when compared to the base case. Its a very minor change overall.

    On the topic of the examining capital investment and change from the base case as the model: I have prepared the model to run with capital investment as an output event, wholesale cost reductions as a industry spending pattern and customer savings as an income event. Is this an appropriate way to setup the model.

    Thanks, 

    William

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    Michael Nealy

    That sound's perfect William! You can check out our support article Analyzing Capital Investments for additional considerations to keep in mind when setting up your Output Event for Capital expenditures, such as whether to utilize a Commodity Output or an Industry Output Event. 

    Best,

    Michael Nealy

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