IEEE Power & Energy Magazine - January/February 2021 - 68
to input parameters, such as the probability distribution of
future hydrological conditions. Despite the efforts made by
ISOs to ensure the transparency and replicability of results,
conflicts (sometimes leading to court cases) occurred frequently because of discrepancies between the assumptions
made by the authority and each firm's private view of what
should and should not go into the simulation model. This is
because assumptions about input parameters affect not only
the centralized estimate of the value of water but also dispatch decisions, prices, and revenues for private firms that
participate in the market.
As highlighted in Figure 3, there are several interesting
commonalities and contrasts between the renewable-dominated systems that may become prominent in future and
hydro-dominated systems such as those in Latin America
(especially prior to the introduction of large amounts of thermal capacity in the 1990s and 2000s).
The first common feature is related to the volatility
of spot prices. Systems with high shares of generation
from resources with zero marginal costs commonly face
extended periods of time when spot prices are zero, followed by periods of high prices when renewable resources
are not available. This happens because these systems are
typically designed to ensure that demand can be supplied
even in the most adverse weather conditions considered in
the simulation model, which, in practice, do not occur frequently. For this reason, it has been common for hydrodominated systems in Latin America to face excess energy
and low spot prices for extended periods of time. Nevertheless, in extremely dry seasons, some demand rationing may
occur, and prices can climb up to the price cap. This phenomenon is illustrated in Figure 4, which shows the observ-
-ed monthly spot prices in the Brazilian Southeast system
from January 1993 until August 1997, when an electricity
Liberalized Markets
Partially Liberalized
MER
(Regional)
Mexico
Systematic Forward
Contract Auctions
Guatemala
EI Salvador
Colombia
Panama
Price Information
Audited
Costs
Agents'
Bids
Geographic Granularity
Single
Zonal
Regulated
Brazil
Chile
Nodal
Argentina
Capacity Product
None
Peru
Market
Based
figure 2. The outlook of wholesale market design elements in Latin America. MER: the Central American regional electricity market.
68
ieee power & energy magazine
january/february 2021
IEEE Power & Energy Magazine - January/February 2021
Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - January/February 2021
Contents
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