Simulation of the Colombian Firm Energy Market
Simulation of the Colombian Firm Energy Market
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Publication or External Link
Date
2006-12
Authors
Cramton, Peter
Stoft, Steven
West, Jeffrey
Advisor
Citation
"Simulation of the Colombian Firm Energy Market," (with Steven Stoft and Jeffrey West), Working Paper, University of Maryland, December 2006.
DRUM DOI
Abstract
We present a simulation analysis of the proposed Colombian firm energy market. The main
purpose of the simulation is to assess the risk to suppliers of participation in the market. We also
are able to consider variations in the market design, and assess the impact of alternative auction
parameters.
Three simulation models are developed and analyzed. The first model (Model 1) uses
historical price data from October 1995 through May 2006 to assess the performance risk of
hypothetical thermal and hydro generating units. The second model (Model 2) uses historical
price and operating data to assess performance risk of the actual generating units in Colombia
over the same period. This analysis allows us to assess company risk. The third model (Model 3)
differs from the other models in that it explicitly models the firm energy auction and investments
going forward. Thus, the model is able to assess how the distribution of firm energy purchases
differs from the firm energy target, and how this distribution depends on the firm energy demand
curve. Model 3 also studies the investment decisions of suppliers, the impact of lumpy
investments, and the impact of a higher scarcity price.