Power price scenarios as the key to sound investment decisions

Why investors in volatile energy markets rely on robust forecasts 

Every investment in the electricity market is also a bet on future prices developments. And this is precisely where the challenge for professional investors lies: how resilient are the revenue assumptions behind a project? The central problem for investors in energy infrastructure is that they have to make decisions with a planning horizon of 15 to 30 years, while the future development of the electricity market is subject to considerable uncertainty. Without long-term power price scenarios, there is no reliable basis for realistically modelling the potential revenue of a project. This is particularly critical for renewable energy plants, whose revenues are heavily dependent on the market price and the so-called profile value (how much the electricity from a renewable plant is valued at). Without reliable data, there is a danger that risks such as falling capture prices, increasing volatility or regulatory changes will be underestimated. This leads to uncertainty in expected returns, makes financing more difficult and can result in economically viable projects not being realised. 

Profitability begins with the price assumption 

Whether they are private equity, infrastructure funds or energy suppliers, investors have to model long-term cash flows. Often over 20 to 30 years. The change in electricity prices is one of the key factors for calculating the return on investment. 

The reality is that project developers often work with different assumptions. Optimistic price forecasts, a lack of sensitivity and non-transparent sources make comparability and risk assessment difficult. 

Montel's European power price scenarios - made for investors 

Montel Energy Brainpool offers market-based and consistent electricity price forecasts up to 2060 for the whole of Europe. These have been developed to provide investors, banks and project developers with a common data basis. 

Key features for investors: 

• See the range of possibilities through three electricity price development scenarios: Central (based on political decision-making and targets), Tension (based on increasing geopolitical pressures impacting energy markets) and GoHydrogen (based on rapid decarbonisation)  

• Understand our modelling assumptions with transparent expansion targets, demand, CO₂ prices, fuel costs and flexibility options 

• Scenarios are updated quarterly, in line with European policy and market developments 

• These projections can be used for due diligence, IRR calculations, sensitivity analyses and portfolio benchmarking 

• Compare multiple European electricity markets possible in order to strategically decide whether or not to enter the market 

Practical example: Valuation of a solar portfolio in Spain 

A European infrastructure fund is faced with the decision to invest in a 300 MW solar portfolio in Spain. The investor uses Montel's power price scenarios to derive the electricity price assumptions from this solar park. The project can be evaluated using both the Central scenario and the Tension scenario. The results show that the project can demonstrate solid yields and can be successfully acquired.  

Power price forecasts are a risk filter - and an opportunity 

For investors, power price scenarios are not just an analysis tool - they are a strategic instrument for managing market risks. Montel provides the basis for well-founded decisions - and thus for sustainable returns in a changing energy market.