Fundamental Curve providers generate and provide their clients price curves known through various names, such as Fundamental Curves, Economic Forecasts, Price Scenarios. These are techno-economic models ran by economic forecasters who aim to provide different scenarios (e.g high, central, and low) of the future going far into the future (20-40 years). These are used by businesses to have an outlook of scenarios of what the future could look like. These are not intended as forecasts. Hence, they are referred by the fundamental modellers as scenarios.
Pexapark, on the other hand, provides Price Forward Curves. These curves are based on actual market transactions and observed prices, not on hypothetical scenarios. They incorporate data from energy exchanges, direct transactions, and consultations with market participants to provide visibility up to 15 years into the future. Utilities and trading companies often rely on this type of price curve.
Where possible - when Pexapark have transaction prices - Capture Curves are derived from market consensus and not from an economic forecast of where capture rates will be in the future.
Given the distinct methodologies behind these curves, a key question arises: which type of price curve is most appropriate for valuing a Power Purchase Agreement (PPA)? For pricing and hedging PPAs, utilities and trading firms prefer Price Forward Curves that reflect current market dynamics. This is also true for market participants such as Corporates and Industrials who want to price their PPAs of the market fair value. Auditors primarily use market-based evidence, in the form of Price Forward Curves to price and value commodity contracts.
To reconcile these different approaches, Pexapark has partnered with AFRY Management Consulting for the creation of the Daily Valuation Curve which combines Pexapark’s market-based forward curves in the short term together with AFRY’s long term scenarios for the long term.