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A structural model to evaluate the transition from self-commitment to centralized unit commitment

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  • Camelo, Sergio
  • Papavasiliou, Anthony
  • de Castro, Luciano
  • Riascos, Álvaro
  • Oren, Shmuel

Abstract

We introduce a dispatch model of Colombia's independent system operator in order to study the relative merits of self-commitment vs. centralized unit commitment. We capitalize on the transition that took place in Colombia in 2009 from self-unit commitment to centralized unit commitment and use data for the period 2006–2012. In our analysis we simulate a competitive benchmark based on estimated marginal costs, startup costs and opportunity costs of thermal and hydro plants. We compare the differences between the self-commitment for the period 2006–2009 and the competitive benchmark to the differences between the bid-based centralized unit commitment and the competitive benchmark after the transition. Based on these comparisons we estimate changes in deadweight losses due to misrepresentation of cost by bidders and dispatch inefficiency. The results suggest that centralized unit commitment has improved economic efficiency, reducing the relative deadweight loss by at least 3.32%. This result could in part be explained by the observation that, before 2009, there was an underproduction of thermal energy relative to the competitive benchmark and it supports the claim that dispatch efficiency has improved after the transition.

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  • Camelo, Sergio & Papavasiliou, Anthony & de Castro, Luciano & Riascos, Álvaro & Oren, Shmuel, 2018. "A structural model to evaluate the transition from self-commitment to centralized unit commitment," Energy Economics, Elsevier, vol. 75(C), pages 560-572.
    • Handle: RePEc:eee:eneeco:v:75:y:2018:i:c:p:560-572
    DOI: 10.1016/j.eneco.2018.09.009
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    5. David Rios & Alex Perez & Jaime Carabali & Luis Meneses, 2024. "Poder de mercado y eventos climáticos adversos en un mercado de electricidad hidro-dominado," Borradores de Economia 1266, Banco de la Republica de Colombia.
    6. Michele Fioretti & Jorge Tamayo, 2021. "Saving for a Dry Day: Coal, Dams, and the Energy Transition," Working Papers hal-03389152, HAL.
    7. Suarez, Carlos, 2022. "Private management and strategic bidding behavior in electricity markets: Evidence from Colombia," Energy Economics, Elsevier, vol. 111(C).
    8. Karimi, Ali & Tarashandeh, Nader & Kouchakzadeh, Amirmasoud & Kouchakmohseni, Farshad & Naghiloo, Mitra, 2022. "Iran's day-ahead electricity market: Structural assessment and solutions," Utilities Policy, Elsevier, vol. 75(C).
    9. Alvaro Gonzalez-Castellanos & David Pozo & Sergio Martinez & Luis Lopez & Ingrid Oliveros, 2018. "Economic Impact of Wind Generation Penetration in the Colombian Electricity Market," Papers 1810.11458, arXiv.org.
    10. John J. García Rendón & Alex F. Pérez-Libreros, 2019. "El precio spot de la electricidad y la inclusión de energía renovable no convencional: evidencia para Colombia," Documentos de Trabajo de Valor Público 17393, Universidad EAFIT.
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    More about this item

    Keywords

    Electricity markets; Self-commitment; Centralized unit commitment; Economic efficiency; Market power;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L89 - Industrial Organization - - Industry Studies: Services - - - Other

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