A model of competition in electricity markets: Bilateral contracts in Colombia
No. 87 (2021-02-01)Author(s)
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Alex Pérez
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Jaime Carabalí
Abstract
In this paper, we elaborate a theoretical model to explain how generating firms choose their aggregate position in bilateral contracts in the Colombian electricity market. Subsequently, we propose an empirical strategy to contrast the theoretical predictions of the model with data from the wholesale market. Our results show that there is evidence in favor of the hypotheses of our model. Firms tend to adjust their contracts according to the ideal generation they expect the market operator to allocate them, and the difference between marginal costs and contract prices.
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