MARKET MODELLING | Projects

Castalia has built and maintains proprietary models to simulate power markets and other competitive trading environments
  • Valuation of over 2,500MW of Electricity Generation Assets, Philippines
    Over the past two years, Castalia has helped AES evaluate a series of transactions for over US$10 billion of electricity assets in the Philippines. For this work, Castalia developed a model that forecasts prices in the newly-established Philippines wholesale electricity market, which we have continued to refine and adapt to changing circumstances. The model reflects the unique operating features of the Philippines market and incorporates the effect of continued Government-ownership of a significant proportion of generation assets
  • Fonterra Advice on Dairy Trade Liberalization Policy, New Zealand
    As a world-leading agricultural producer, New Zealand is generally perceived to benefit from any initiatives to liberalise trade. Castalia developed a specialised economic model to test this assumption. Castalia’s global dairy model identified dairy market outcomes resulting from specific trade policies, enabling New Zealand’s largest company, Fonterra, to understand the trade policy that would maximise its commercial interests
  • Market for Tradable Emissions Permits, United States
    Following the Californian power crises of 2000-2001, the United States Federal Energy Regulatory Commission needed to determine the amounts owed to market participants by conducting an ex-post evaluation of fair market prices. To obtain a credible view of the full costs of generating electricity during the crisis, Castalia analysed historical data on the markets for sulphur dioxide (SOx) and nitrous oxide (NOx) permits. This analysis provided an independent assessment for Pacific Gas and Electric on the prices determined by the regulator
  • Analysis of Electricity Market Manipulation, Philippines
    Market power concerns are particularly acute in competitive power markets, where the ownership of generation assets is often concentrated in a small number of players and prices fluctuate widely in a short amount of time. Castalia investigated allegations of market manipulation in the Philippines by comparing theoretical pricing based on rational bidding behaviour to a series of unusual outcomes observed in the market. We found that observed prices did not result from commercially rational bidding strategies, and that other factors were affecting market prices
  • Modelling the Impact of an Emissions Trading Scheme, New Zealand
    To help meet the country’s obligations under the Kyoto Protocol, the New Zealand Government proposed an emissions trading scheme that would cap greenhouse gas emissions. Castalia developed a scheduling model to quantify the effects of the proposed emissions trading scheme on the plant operations and market value of New Zealand’s largest thermal electricity generator. The results of the model helped the company understand the full effects of the proposed legislation and develop strategies to respond
  • Ensuring Security of Electricity Supply Policy in a Hydro Dominated Power System, New Zealand
    New Zealand’s electricity system is highly dependent on hydroelectric generation. In recent years inflows to hydro reservoirs have been too low to guarantee security of supply. The Government responded to the resulting market uncertainty with an explicit reserve energy policy that centrally procures standby thermal generation. Castalia added hydro-inflow simulations and plant outage data to our model of the New Zealand power market to recommended changes to the reserve energy policy. The model allowed Castalia to use a probabilistic analysis of unserved demand for electricity to produce economic criteria for reserve energy decisions.