Abstract

GARCIA-RENDON, JOHN J.; GUTIERREZ GOMEZ, ALEJANDRO; VARGAS TOBON, LUISA  and  VELASQUEZ CEBALLOS, HERMILSON. Smart grids and demand response mechanism: the case of the Colombian electricity market. rev. econ. Caribe [online]. 2019, n.23, pp.32-45. ISSN 2011-2106.

Smart grids now figure prominently in the international debate on the design and regulation of electricity markets. This paper analyzes the potential effects of implementing a demand response mechanism in the Colombian wholesale electricity market with characteristics similar to that of the PJM market. Using time series models and controlling for the high volatility presented in the spot price, we estimate that such a mechanism could yield significant economic savings for customers. For example, if the demand response mechanism had been implemented during 2015, the spot price in peak hours would have been 30% lower and customers would have saved approximately COP $99.000 million.

JEL: C32, D47, L52

Keywords : Demand response; Colombian electricity market; ARIMAX -ARCH; Economics benefits.

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