Fti Consulting, Inc. · NYSE:FCN
Fti Consulting — Investor Presentation (June 2011)
11 slides from Fti Consulting's investor presentation, Jun 21, 2011
Slide 1: Market definition and competitive assessment in the wholesale electricity market
Market definition and competitive assessment i th in the wholesale h l l electricity l t i it market k t CERRE workshop, Brussels June 21st Guido Cervigni IEFE-Bocconi University, Milan
Slide 2: Agenda
A Agenda d The standard approach for the competive assessment applied to wholesale electricity markets Market power assessment with endogenous market definition: Pivotality Topics for the discussion
Slide 3: The standard approach to assessing competition applied to the wholesale electricity generation
The standard approach to assessing competition applied to the wholesale electricity generation 14% 29% 57% Industry structure Relevant Market Degree of competition
Slide 4: The SSNIP test applied to wholesale power generation
Th SSNIP ttestt applied The li d tto wholesale h l l power generation ti The SSNIP test: - Choose the smallest set of generators candidate to be a market - Assume A a price-increase i i (5 10%) (5-10%) - Assess competitive pressure (is the price-change profitable?) - If not – expand the candidate
Slide 5: A different competitive assessment in each hour?
A diff differentt competitive titi assessmentt in i each h hour? h ? 14% 14% 17% 14% 29% 17% 57% 60% 70% 30% of the time 10% of the time 60% of the time
Slide 6: Does market power depend on market shares?
D Does market k t power d depend d on market k t shares? h ? €/MWh €/MWh P Mkt Pwr P. ofit Pro P. Comp Profit MW MW Even small generators can have much market power when capacity is tight
Slide 7: Does market power depend on market shares? High concentration with no market power
Does market power depend on market shares? €/MWh €/MWh P. Comp P. Mkt Pwr MW MW High concentration with no market power
Slide 8: Market power assessment with endogenous market definition: Pivotality
Market power assessment with endogenous market definition: Pivotality Bid curve Market ppower: abilityy and incentive to set prices higher than the competitive level Ppivot A possible index of market power in electricity generation is the ability to corner the market - or Pivotality Demand Pivot
Slide 9: Adjusted Pivotality indicators
Adj t d Pivotality Adjusted Pi t lit indicators i di t Pivotal Capacity (MW) - Ability Ability & Incentive Ability to corner to exercise market the market power Inflexible output = 0 Incentive to corner the market Hedged g load = 0 Pivotal capacity p y (MW) - Incentives Hourly pivotality adjustmen
Slide 10: Wrap-up
Wrap-up The Th standard t d d Market-definition M k t d fi iti / Competitive C titi assessmentt approach may not be satisfactory in the electricity market Pivotaly is becoming a reference for regulators and competition authorities Pivotality analyses are meant as a firt screening and not a sub
Slide 11: Topics for the discussion
Topics for the discussion What is an “acceptable” degree of market power: the US approach to market power mitigation How will market power assessed (and mitigated) when zero variable cost (renewable) generators will be “price- maker” for the majority of the hours?