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The effects of changes in the regulation of the Colombian wholesale electricity market in a structural model of complex auctions

Jorge Balat, Juan Esteban Carranza, Juan David Martin and Alvaro Riascos (ariascos@uniandes.edu.co)

Borradores de Economia from Banco de la Republica de Colombia

Abstract: We investigate the effects of a change in the regulation of the spot market for electricity in Colombia that took place in 2009. Specifically, the regulation switched from an auction mechanism with simple bids to one with complex bids to allow generators to separately bid on variable and quasi-fixed components. This greater exibility was introduced to reduce production inefficiencies that arise from non-convexities in the cost structures of thermal generators. In this paper, we estimate and compute a structural model to quantify the effects of this change on allocation efficiency along with the effects on the wholesale price of electricity in Colombia. Consistently with previous reduced form evidence, we show that the production efficiency increased under the new dispatch mechanism, but prices increased. ****RESUMEN: En este documento investigamos los efectos de un cambio en la regulación del mercado spot de electricidad en Colombia, que tuvo lugar en 2009. Específicamente, la regulación cambió de un esquema de subastas simples a uno de subastas complejas para permitir a los generadores hacer ofertas separadas de los componentes fijos y variables de sus costos. El aumento en la flexibilidad tuvo como objeto la reducción de las ineficiencias que resultan de las no-convexidades en las estructuras de costos de los generadores térmicos. Estimamos y computamos un modelos estructural que cuantifica los efectos de este cambio en la eficiencia del despacho de energía y en los precios mayoristas. De forma consistente con resultados descriptivos previos, encontramos que bajo el nuevo mecanismo de despacho se incrementó la eficiencia, pero los precios se incrementaron.

Keywords: Auctions; structural estimation; electricity markets; subastas; estimación estructural; mercados de electricidad (search for similar items in EconPapers)
JEL-codes: C57 L94 Q4 (search for similar items in EconPapers)
Pages: 49
Date: 2022-10
New Economics Papers: this item is included in nep-ene and nep-reg
References: Add references at CitEc
Citations: View citations in EconPapers (4)

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https://doi.org/10.32468/be.1211

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