Analysis to the firm energy market proposal for the Colombian electricity market

Abstract

Firm energy market proposal for the Colombian electricity market is analyzed. It is based in a product: firm energy - the ability to provide electricity in a dry period - and it includes a financial call option and the physical capability to supply firm energy. This new market coordinates investment in new resources to assure that sufficient firm energy is available in dry periods. Load will be procured under a descendent clock auction format. Although, auctions has been the most efficient allocation mechanism, questions about the possible outcomes using the allocation format designed, and the incentives that participants have to collude or deviate from the true strategies have not been solved, neither questions about the way participants must behave (supply curve shape). This paper summarizes the research work in order to give solution to these problems under a simple methodological approach simulating agents' behavior in auction simulated exercises.