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A structural model to evaluate the transition from self-commitment to centralized unit commitment

Sergio Camelo, Anthony Papavasiliou, Luciano de Castro, Alvaro Riascos () and Shmuel Oren

Energy Economics, 2018, vol. 75, issue C, 560-572

Abstract: We introduce a dispatch model of Colombia's independent system operator in order to study the relative merits of self-commitment vs. centralized unit commitment. We capitalize on the transition that took place in Colombia in 2009 from self-unit commitment to centralized unit commitment and use data for the period 2006–2012. In our analysis we simulate a competitive benchmark based on estimated marginal costs, startup costs and opportunity costs of thermal and hydro plants. We compare the differences between the self-commitment for the period 2006–2009 and the competitive benchmark to the differences between the bid-based centralized unit commitment and the competitive benchmark after the transition. Based on these comparisons we estimate changes in deadweight losses due to misrepresentation of cost by bidders and dispatch inefficiency. The results suggest that centralized unit commitment has improved economic efficiency, reducing the relative deadweight loss by at least 3.32%. This result could in part be explained by the observation that, before 2009, there was an underproduction of thermal energy relative to the competitive benchmark and it supports the claim that dispatch efficiency has improved after the transition.

Keywords: Electricity markets; Self-commitment; Centralized unit commitment; Economic efficiency; Market power (search for similar items in EconPapers)
JEL-codes: Q40 Q42 Q49 L11 L5 L89 (search for similar items in EconPapers)
Date: 2018
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Working Paper: A Structural Model to Evaluate the Transition from Self-Commitment to Centralized Unit Commitment (2016) Downloads
Working Paper: A Structural Model to Evaluate the Transition from Self-Commitment to Centralized Unit Commitment (2016) Downloads
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