Abstract

VENSLAUSKAS, Ona Duarte  and  GARCIA RENDON, John J. An Analysis of Colombian Power Market Price Behavior from an Industrial Organization Perspective. ecos.econ. [online]. 2015, vol.19, n.41, pp.1-23. ISSN 1657-4206.  https://doi.org/10.17230/ecos.2015.41.1.

We analyze the behavior of spot prices in the Colombian wholesale power market, using a series of models derived from industrial organization theory. We first create a Cournot-based model that simulates the strategic behavior of the market-leader power generators, which we use to estimate two industrial organization variables, the Index of Residual Demand and the Herfindahl-Hirschman Index (HHI). We use these variables to create VAR models that estimate spot prices and power market impulse-response relationships. The results from these models show that hydroelectric generators can use their water storage capability strategically to affect off-peak prices primarily, while the thermal generators can manage their capacity strategically to affect on-peak prices. In addition, shocks to the Index of Residual Capacity and to the HHI cause spot price fluctuations, which can be interpreted as the generators´ strategic response to these shocks.

Keywords : Cournot model; energy market; Herfindahl-Hirschman index; residual demand index; spot price; VAR.

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