04 January 09: Market Analysis' report on Colombian firm energy auctions is published by the Colombian Commission for the Regulation of Energy and Gas
Market Analysis' report on the Colombian auctions for firm energy has been published by the Colombian Commission for the Regulation of Energy and Gas (CREG). The report by David Harbord and Marco Pagnozzi reviews the auctions for Firm Energy Obligations (OEFs) held in May and June last year. The auctions allocated OEFs to new and existing generating plant in order to guarantee a sufficient long-run supply of firm energy at competitive prices. OEFs commit generating companies to supplying energy to the market at a fixed price during periods of scarcity. Generators supplying energy under an OEF are paid the Scarcity Price for the amounts of energy supplied up to their committed quantities, and receive the spot price on any additional quantities.
The first OEF auctions were held in May and June 2008 and allocated OEFs for periods of up to twenty years beginning in December 2012. As a result some 9,000 GWh per year of OEFs were allocated to new resources, along with 62,860 GWh per year allocated to existing generating plant at an auction-determined option price of $13.998/MWh. Existing generating plant will receive the option fee for a single year beginning December 2012, while new resources are guaranteed the fee for up to twenty years. Subsequent auctions will be held whenever the CREG estimates that the demand for energy in future years cannot be covered during scarcity periods by the energy production of existing generation resources and any planned new resources that will enter into operation. To quote the CREG, ``this new scheme aims to ensure the reliability in the supply of energy in the long-run at efficient prices.''
Market Analysis was commissioned to provide a detailed analysis of the performance of the OEF auctions held in May and June 2008, and to make recommendations for the improvement of future auctions. Specifically we were asked to conside the information provided to participants both before and during the auctions, and any other aspects of the auction designs relevant to auction performance. Our conclusions and recommendations are detailed in our report of 25 November which is available here. It can also be obtained on the Publications section of this website under Reports and Submissions.