Client : Independent Power Producer

An IPP which has established itself as a leader in the field of energy. Based in California, it operates two natural gas fired cogeneration facilities, and was working to develop new power plants to meet California and Western States' energy needs for the future. As part of the valuation studies for build or buy decision, EnWorkz PowerUp was used to simulate plant operating profits over twenty years time horizon, given stochastic forward price model.

In the particular case, the rate of return of the project being considered was several percentage points above the developer’s hurdle rate if unconstrained operation was assumed. Modeling constraints on operation without PowerUp by choosing blocks of power ex ante (based on the generating unit’s minimum up and down time constraints) and then determining whether it was economic to operate in that block or not imposed far greater constraints than was realistic and brought the project’s return down close to the developer’s hurdle rate causing some concern. Optimization under uncertainty and flexible choice of time blocks by PowerUp produced a more realistic dispatch pattern and a rate of return that was only several tenths of a percent below the unconstrained dispatch.

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