These are the most exciting times in the electric power industry since Thomas Edison was alive—that’s both the bad news and the good. The boom and bust forces of change are moving us through the correction stage of the power business cycle setting up a return to growth.
What keeps investors and energy executive up at night?:
- Lower energy demand has hurt utility and merchant generator revenues and earnings but costs are continuing to grow, how do I refocus my business for growth in the next stage?
- Environmental regulations are driving up costs in future energy bills for renewable energy, reduced emissions and smart grid. How do I prepare for rate spikes ahead?
- I’m a large industrial energy buyer, where are the “sweet spots” in the recovery stage of power business cycle to position my energy portfolio for the future?
- Will private equity be the vulture capitalist winners of the market correction?
- I am sitting on capital, but I don’t know which technologies where or when to deploy it?
- Renewables are hot but will I pay too much in a falling price market?
- With electricity demand falling and proposed projects being cancelled I am worried about energy reliability for my business future. How do I hedge that risk.
TCLABZ Scenario Process
The TCLABZ scenario building process begins with a detailed assessment of the key strategic questions from the perspective of future pre-determined elements and key uncertainties.
1 TCLABZ trend analysis. TCLABZ performs a dynamic temporal, text and semantic analysis of web trends on key energy industry issues applicable to the scenario building blocks to identify driving forces and themes at work. The patterns of key uncertainties are identified which are later played out across scenarios. These trend analysis highlights themes are the heart of future scenarios—distinct, equally plausible, and internally consistent views on the future.
2 TCLABZ Collaborative Scenario Development. TCLABZ assembles a diverse group of clients and research staff to review the scenario baseline and identify building blocks and themes. Those building blocks are assessed across the online community to gather the wisdom of the crowd. Through an iterative process typically done in wiki on our Ingeniux Cartella provided collaboration platform, the scenarios themes are refined and developed gaining rigor and credibility resulting in a consensus on four scenarios to be developed. Implications are assessed across the energy supply chain as they create a common language that improves the efficiency and speed of analysis by the community.
3 TCLABZ Scenario Stories and Timelines. Using the four scenario stories and timelines TCLABZ moderators and staff guide the community to stretch the stories apart and make them distinct but consistent in approach. A descriptive name is given to each scenario to clearly communicate its essence. Scenario storylines are refined reflecting key themes and drivers in a consistent way with timelines to identify milestones.
4 TCLABZ Scenario applications. An internally consistent scenario is essential to capture all the critical assumptions and uncertainties to feed quantitative models to assess market strategy and risk and the stochastic performance of portfolio options across the scenarios. Bringing the scenarios in house to serve as a consistent, independent, transparent basis for portfolio and market strategy risk improves the quality of business analysis and leverages the wisdom of the crowd to provide the best combination of qualitative and quantitative predictive energy analytics.
5 TCLABZ Strategy Forum. With the TCLABZ scenarios and timelines assembled the last step is to keep the community engaged over time to assess implications across the energy value chain, markets, technologies and types of market participants to identify key opportunities and risks. These “sweet spots” are the focus of the online community moderators and periodic meetings of the TCLABZ Strategy Forum, a high level community of users who drive the TCLABZ scenario research process, tracks signposts and discuss their strategic implications across the scenarios over time.
Scenario analysis works by challenging conventional wisdom and empowering a process of imagining alternative views of the future. Combining these alternative views of the future with the disruptive innovation technology of predictive analytics enable us to rehearse strategy and examine risk in ways not possible otherwise. The scenario process aligns the organization around a common language for managing uncertainty to enable managers to see beyond their biases to imagine alternative strategies and risks.
- The Seeds of the Next Power Boom were Sown in the Last Bust (insightadvisor.wordpress.com)
- Market Rationalization Demands Grid Parity (insightadvisor.wordpress.com)