Asset Deployment and Valuation
When clients are putting their assets at risk in the market – capacity, capital, capabilities, or information – they want to be sure that they are earning the best possible return. Cascade uses a systematic, market-based approach to ensure that existing assets are earning the best possible return, and to guide profitable investments in new assets. At the core of Cascade’s approach is explicitly measuring the value of both existing and new assets, given alternative capital investment and operating strategies.
Our approach includes the following steps:
A key element of asset evaluation is to understand the marginal value of deploying additional assets into the client’s operating system or network. By optimizing asset utilization, the models produce reliable estimates of marginal cost and profitability, which can be used directly to compute the marginal values of additional capacity. This information has been used by our clients to guide future investment decisions in both the type and timing of new asset deployment.
- Determine asset cost and performance. In addition to the capital costs of new assets, we estimate variable operating costs, which may include forecasts of fuel prices or other commodities.
- Forecast product and service markets. Cascade uses statistical forecasting methods to assess the potential markets for products and services, and to estimate the impact of new or improved product offerings on those markets.
- Determine optimal asset utilization. Cascade works with its clients to develop quantitative models of the production / service delivery process, and uses these models to optimize profitability and return on assets.
- Assess market and technology risk. Because changes in markets, operating costs, and regulations can significantly impact the value of our client’s assets, we explicitly account for these key uncertainties in helping guide our clients’ asset deployment decisions.
Assessing the Value of Future Electric Technologies
The Cascade team worked with the Electric Power Research Institute to create a model of the U.S. electric power system that simulates capacity expansion and the effects of changing electricity markets and advancing technologies. EPRI has successfully applied the Cascade methodology in a range of applications to better prioritize R&D, evaluate the impact of changing regulations and policy and plan for future electricity markets. |