Energy Portfolio Software Emerges as Key Component For Power Industry in EPA Regulation Battle

A continuing battle over EPA emissions has left power industry professionals scrambling to keep their portfolios prepared for regulations that could seemingly lurch in any direction, but developers at Ascend Analytics say their modular, customizable energy analysis software is ready to make sense of the energy outlook no matter whichway it tilts.  The last four months have seen tectonic shifts across the regulatory landscape. In July, the EPA introduced Cross State Air Pollution Rule (CSAPR) restrictions on SO2 and NOx with a market launching in 2012 to trade emission allowances.  Less than two months later, the Obama administration delayed new ozone standards until 2013, a move widely decried by environmental activists as a surrender to big business.  But now the administration is promising to veto a GOP-sponsored bill that would impose lengthy delays on CSAPR and other upcoming emissions mandates. The Transparency in Regulatory Analysis of Impacts on the Nation act (TRAIN) was approved by the U.S. House of Representatives Sept. 23.  The act would require detailed financial analyses on the EPA rules’ impact. The act would delay new mercury rules for power plants and postpone the NOx and SO2 restrictions and trading market.  Ascend Analytics President Gary Dorris says the seesaw shifts make it difficult for executives to manage capital investments and shape portfolios for natural gas, coal and renewable energy.  Dorris says his company’s software allows users make as many plans for as many changes as they can foresee, and run each through an advanced simulation engine.

“If you don’t know what’s going to happen, you have to be ready for anything to happen,” Dorris says. “Our customers can build a plan and a portfolio for each scenario and then take it for a test ride.”

Whatever the environmental or economic merits, rolling out regulations and then rolling them back can have enormous impacts.  In the four days after the NOx and SO2 reductions were announced in July, broker trades for NOx emission allowances climbed from $150 per ton to $9500 – that spike occurring a full six months before the emissions market would even open. Such increases would make older coal plants lacking scrubber technology uneconomical.  If those rules don’t happen, the plants could remain profitable. Market uncertainty floats as a data point in every energy portfolio but political uncertainty of this magnitude remains difficult to quantify.  With Ascend Analytics software, energy portfolio planners test as many permutations of EPA rules as they wish to model.  Providing streaming market forward curves with CurveDeveloper, and risk-based decision analysis from PowerSimm, Ascend provides a comprehensive platform to model proposed regulations for integrated utilities, wholesalers, and retail providers.  PowerSimm applies detailed modeling and simulation of emissions, power, and fuel markets synched to generation, load, and hedge strategies to determine future costs and risk.  The model can then select an future supply portfolio optimized to changing regulatory and market risks and costs.  Armed with solid simulations and data, Ascend Analytic’s customers can plan with confidence for new EPA restrictions.  Whatever they turn out to be.

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