Inputs to the Fundamentals Model

The fundamental power market forecast model aims to capture the drivers of electricity prices and demand in a structured, transparent way. At its core, the model combines multiple input streams – each representing a critical part of the power system – to build a coherent view of how markets may evolve. Getting these inputs right is essential for producing reliable forecasts.

The first building block is the Demand Forecast. Demand is not a single number but a dynamic hourly profile shaped by households, industry, and the uptake of new technologies such as electric vehicles and heat pumps. Structural changes in how societies consume energy, combined with efficiency gains, play a defining role in the demand outlook.

On the supply side, the Generation Forecast is equally important. This includes both renewables (wind, solar, hydro) and Conventional Generation (gas, coal, nuclear), along with the growing role of storage and emerging vectors such as green hydrogen. Capturing the availability and cost structure of these resources is central to the model.

Markets are also increasingly interconnected. Market Coupling & Interconnection allow electricity to flow across borders, smoothing supply and demand imbalances. At the same time, Other Inputs such as weather patterns, grid expansion projects, and hydrogen pipeline development shape how flexible or constrained the system may be in the future.

Finally, Price Formation factors like oil, gas, and CO₂ markets feed directly into marginal cost calculations. Because these global commodities often set the price in European markets, they form an indispensable part of the fundamentals framework.

Each of these inputs is explored in detail in the following pages, ensuring transparency and clarity in how the model is built.