Market Analysis was retained by AES Chivor Colombia to assist in formulating AES’s bidding strategy in the Colombian auction for long-term renewable energy contracts held October 22, 2019. This auction was unusual in design. For buyers it was a straightforward single product, sealed-bid, average-price auction; for sellers it was a multiproduct, combinatorial, pay as bid auction. This design meant that an optimizing algorithm was required to find the auction solution for any set of simulated demand and supply bids.
Phase 1 of the project consisted in assembling information relating to the demand and supply curves expected to pertain to the auction process. Phase 2 involved a series of increasingly realistic mock auctions using the computer program for solving the auction made publicly available by the Ministerio de Minas y Energía. This program allowed us to simulate the auction using up to 15 seller bids in any round and up to six firms.