Market Forecasting

Romeu Gaspar's picture
Forecasting is about the journey, not the destination: what you learn in the process will be more useful than the forecast itself.
Romeu Gaspar
We are often asked to make market forecasts, so we decided to go back to some of our older forecasts and see how well we fared. We found that most forecasts had a fair 15-20% deviation from the actual figures (Exhibit 1). There were however outliers: on the one hand, we overestimated the global installed capacity of wave energy by an order of magnitude, while on the other hand we predicted the evolution of wind energy costs inside a 5% margin. In any case, the real value of forecasting is what you learn in the process, as it forces you to understand and quantify the forces that shape a particular market. In this article we share four lessons learned while making market predictions and forecasts.
Exhibit 1 – Comparison of several 5-year forecasts with actual market data
Exhibit 2 – Example of a Delphi method applied to estimating the LCoE of several PV, CSP and wind energy specific plant configurations
Exhibit 3 – Example of using the historical early wind energy deployment as a sanity check for a bottom-up forecast for wave energy deployment
Exhibit 4 – Comparison of three scenarios for the evolution of carbon credit prices with the actual market prices
Exhibit 5 – Example of a Monte-Carlo simulation applied to the valuation of a CSP plant