Competition Buzz: Market Power in Electric Energy Generation Spot Markets: Analysis Methodology

By:John J. Garcia, Santiago Bohorquez, Gustavo A. Lopez Sr. & Freddy Marin
After analyzing international experiences related with power market monitoring and controlling, a methodology based on Colombia´s electric pool characteristics is presented. This method allows following strategic behavior about stock price in this market. An exponential model is proposed for the pool supply function based on a spot prices model, explained by costs, weather conditions, Commission of Gas and Energy Regulation interventions, daily demand, generated quantities and historical price. Through a convolution (similar to Kalman´s filter technique) about historical prices, parameters and associated dynamic elasticity related with quantities that specify the stock price behavior are estimated. These estimations are also used for structuring profits of a Cournot model, quantities competition, that evidence the positive effect, by stock price diminishing, of higher future contracting levels in the Colombia´s electric pool.

Full Content: SSRN

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