BELIEVE – Building Enhanced financial resiLience by Integrating Environmental Variability into Economic dispatch

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Innovate UK
Innovate UK
Innovate UK
Innovate UK
Innovate UK

£247,925

May 31, 2022

Aug. 31, 2022

The world is currently undergoing a strategic energy transition. Huge amounts of capital are being committed to renewable energy technologies in the way of debt funding, Venture Capital and Private Equity investment as well as insurance premiums and pension fund investments.

Whilst financial market actors chase lucrative opportunities, the risks are also high. In particular, the potential for variability in asset performance presents significant challenges for those planning pricing strategies, pricing financial risk, monitoring financial exposures or assessing the attractiveness of potential future investments. Sound electricity market modelling is thus of significant value for financial services as well as energy operators.

A common requirement is the need to understand how assets, or portfolios of assets, will perform over different future timeframes. The BELIEVE project will provide improved strategic insight on the future operational and financial performance of electricity generation assets across a range of business-relevant timeframes. We will do this through an enhanced capability to model future returns from generation assets ('economic dispatch').

In the context of the BELIEVE project, 'economic dispatch' means the modelling of the market dynamics of energy systems. This capability is required by financial services organisations to explore the future revenue generation potential, and hence the valuation of, individual assets or portfolios of assets. This insight is required over a range of timeframes from months to decades. This contrasts with 'operational dispatch', which is about hourly or sub-hourly decision-making and is primarily the concern of asset operators.

The current state of the art in economic dispatch tends to neglect the challenges posed by the increased penetration of variable renewable energy (primarily wind and solar). Through the BELIEVE project our aim is to enrich traditional economic dispatch modelling by incorporating the effects of weather variability, in both the present and future climates. We will demonstrate the utility of this enhanced modelling capability in markets with increasing proportions of variable renewable generation.

The result will be a highly innovative and powerful modelling capability that represents a more comprehensive methodology for asset valuations, with the potential to provide significant additional insight for financial services actors.

BELIEVE will be led by the Institute for Environmental Analytics, a leading centre for applied weather and climate analytics at the University of Reading.