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Electricity and Emissions Models

North American Electricity Model

The North American Regional Electricity model enables users to analyze how North American electricity regions are connected to one another, fuel supplies, and how each regional market is affected by certain government regulations for SOx, NOx, Hg, and CO2. In broad industry use for over two decades, the North American Regional Electricity Model is the base for Deloitte MarketPoint’s North American Electricity Model. It is a price (including price of energy, capacity and ancillary service), basis, quantity, and capacity addition model of the North American electric market. Its geographic scope includes all of NERC, which includes Canada and Northern Mexico, as well as all of the lower 48 United States.

MarketBuilder's Integrated North Americal Emissions Model

The core of the North American Electricity Model is a highly-detailed, regionally disaggregated network representation of North American electric generation assets, transmission corridors, load and ancillary service patterns of consumer demand during peak, middle intermediate and base hours. It is designed to simulate how regional interactions between fuel supply, generation, inbound and outbound transmission, load, and consumption interact to determine market clearing prices, flowing energy, and new capacity additions at each forward point in time. The model has a flexible time horizon, allowing daily, weekly, monthly, and yearly cycle models to be built and run.

The North American Electricity Model is designed to simulate both pre-existing and new capacity based on economic models of profitability based on competitive game theory. The North American Electricity Model provides an interconnected national and international view of the major regions and contains the seven major elements of power markets:

  1. Fuel substitution
  2. Generation investment, operation, and retirement
  3. Mark to market price competition at the busbar
  4. Net energy for load and ancillary service
  5. Outbound transmission
  6. Inbound transmission
  7. Transmission capacity expansion

All of these factors interact in every one of the 180 regions simultaneously. This enables a continent-wide market solution that is interconnected and explicitly considers generation and transmission capacity changes. The market solution captures the fact that today's capacity additions depend on tomorrow’s price, and tomorrow's price depends on today's capacity additions.

Emissions Models

Government emissions regulations, like cap-and-trade, are reshaping the energy markets. Tradable emissions allowances have begun to significantly affect North American generators, refiners, and other plant operators. Fortunately, the Deloitte MarketPoint models are built and maintained to evolve over time with market changes. There is a complete cap-and-trade structure within the North American Electricity Model. Within each of the 18,500 existing and prospective generators in the North American Electricity Model is a set of emissions coefficients indicating the expected effect of regulations on plant profitability.

The plant emissions data, derived in part from EPA studies and in part from proprietary research by Deloitte MarketPoint, is complete and operational. It contains not only the obvious - emissions coefficients for existing plants - but also the not so obvious, such as the cost of retrofit and changes in emissions coefficients for existing plants required by changing emissions standards. The model is an agent-based simulation that represents how companies would react to changing regulation. In summary, the model combines coal switching, plant retrofits, greenfield plant entry, and plant retirements into its solution.

As used in this document, ‘Deloitte’ means Deloitte LLP (and its subsidiaries). Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

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