ASSESSING COMPETITION IN BRAZIL’S ELECTRICITY MARKET IF BID-BASED DISPATCH WERE ADOPTED

Hochstetler, Richard L.; Cho, João D.

doi:10.1590/198055272322

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Revista de Economia Contemporânea

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Articles • Rev. econ. contemp. 23 (02) • 2019 • https://doi.org/10.1590/198055272322 copy

ASSESSING COMPETITION IN BRAZIL’S ELECTRICITY MARKET IF BID-BASED DISPATCH WERE ADOPTED

AVALIAÇÃO CONCORRENCIAL DO MERCADO DE ENERGIA BRASILEIRO COM DESPACHO POR OFERTA

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

Market simulation, based on structural characteristics, is a useful tool for ex-ante competition analysis of major market changes, such as: market liberalization, mergers and acquisitions, divestitures, and regulatory reforms. In this paper, Cournot-Nash simulation is used to evaluate the expected market equilibrium if the Brazilian electricity market were liberalized. A sensitivity analysis is utilized to evaluate how the market equilibrium is impacted by different factors, such as: different demand price elasticities, divestiture of the dominant market player, different initial equilibrium point and different hydro inflow scenarios.

KEYWORDS:
antitrust; electricity market; Cournot-Nash simulation

CASE SPECIFICATION									RESULTS
Case	Eletrobras	Discount rate	Price elasticity	Reference equilibruim		First period	First period		Second period			Price change
				Price (R$/MWh)	Quantity (MW-avg)	Hydro inflow scenario	Hydro Supply (MW-avg)	Price (R$/MWh)	Hydro Inflow Scenario	Hydro Supply (MW-avg)	Price (Present value) (R$/MWh)	First Period	Second period
				Price (R$/MWh)	Quantity (MW-avg)	Hydro inflow scenario	Hydro Supply (MW-avg)	Price (R$/MWh)	Hydro Inflow Scenario	Hydro Supply (MW-avg)	Price (Present value) (R$/MWh)	First Period	Scenario	Avg
1	Consolidated (stationary state)	6%	-0.3	205	65,000	Long term average	62,403	188.18	low	43,294	307.13	-8%	50%	30%
									medium	50,234	270.94		32%
									high	56,933	221.45		8%
2	Consolidated	6%	-0.3	205	65,000	Long term average	62,403	188.18	low	47,639	282.05	-8%	38%	23%
									medium	50,751	266.33		30%
									high	58,670	205.55		0%
3	Split up	6%	-0.3	205	65,000	Long term average	63,376	175.04	low	57,351	218.59	-15%	7%	-10%
									medium	60,591	187.78		-8%
									high	65,341	146.50		-29%
4	Split up	3%	-0.3	205	65,000	Long term average	63,343	175.38	low	57,532	218.58	-14%	7%	-12%%
									medium	62,371	174.47		-15%
									high	65,341	146.50		-29%
5	Split up	6%	-0.1	205	65,000	Long term average	61,827	165.05	low	47,452	380.51	-19%	86%	33%
									medium	58,776	221.46		8%
									high	59,096	218.61		7%
6*	Split up	6%	-0.5	205	65,000	Long term average	66,515	167.44	low	59,530	195.83	-18%	-4%	-20%
									medium	64,947	166.49		19%
									high	72,298	126.74		-38%
7	Split up	6%	-0.3	150	65,000	Long term average	63,143	129.15	low	56,832	195.83	-14%	9%	-11%
									medium	62,407	126.74		-16%
									high	64,703	110.70		-26%
8	Split up	6%	-0.3	100	65,000	Long term average	63,1819	87.43	low	55,300	111.67	-13%	12%	-8%
									medium	60,309	93.14		-7%
									high	65,865	72.32		-28%
9	Split up	6%	-0.3	205	63,000	Long term average	62,764	159.40	low	56,355	209.17	-22%	2%	-14%
									medium	60,261	175.02		-15%
									high	63,457	143.85		-30%
10	Split up	6%	-0.3	205	67,000	Long term average	64,357	186.33	low	59,268	218.61	-9%	7%	-8%
									medium	63,186	183.88		-10%
									high	65,647	162.78		-21%
11	Split up	6%	-0.3	205	65,000	El ninõ	70,129	115.90	low	57,392	218.18	-43%	6%	-11%
									medium	61,389	181.60		-11%
									high	65,440	145.52		-29%
12	Split up	6%	-0.3	205	65,000	La ninã	61,157	195.63	low	53,501	244.58	-5%	19%	-4%
									medium	59,825	195.00		-5%
									high	64,582	152.96		-25%
13	Split up	6%	-0.3	205	65,000	5 worst inflows	54,383	253.10	low	52,668	252.80	23%	23%	4%
									medium	57,460	217.52		6%
									high	63,005	168.21		-18%
14	Split up	6%	-0.3	205	65,000	5 best inflows	89,829	0.00	low	57,351	218.59	-100%	7%	-11%
									medium	62,043	176.89		-14%
									high	64,790	150.90		-26%

CASE SPECIFICATION									RESULTS
Case	Eletrobras	Discount rate	Price elasticity	Reference equilibruim		First period	First period			Second period		Price change
				Price (R$/MWh)	Quantity (MW-avg)	Hydro inflow scenario	Hydro Supply (MW-avg	Price (R$/MWh)	Hydro Inflow Scenario	Hydro Supply (MW-avg)	Price (Present value) (R$/MWh)	First Period	Second period
				Price (R$/MWh)	Quantity (MW-avg)	Hydro inflow scenario	Hydro Supply (MW-avg	Price (R$/MWh)	Hydro Inflow Scenario	Hydro Supply (MW-avg)	Price (Present value) (R$/MWh)	First Period	Scenario	Avg
15	Split up	6%	-0.3	205	65,000	Long term average	63,541	176.24	low	53,036	259.42	-14%	27%	-12%
									medium	62,134	176.89		-14%
									high	75,353	103.46		-50%
16	Split up	3%	-0.3	205	65,000	Long term average	66,237	155.85	low	51,829	271.02	-24%	32%	-3%
									medium	58,473	208.28		2%
									high	71,221	119.35		-42%
17	Split up	6%	-0.1	205	65,000	Long term average	61,885	167.53	low	34,509	2187.09	-18%	967%	394%
									medium	48,389	457.03		132%
									high	49,268	396.13		93%
18*	Split up	6%	-0.5	205	65,000	Long term average	68,629	162.22	low	57,423	208.74	-21%	2%	-12%
									medium	67,700	156.44		-24%
									high	80,031	115.91		-43%
19	Split up	6%	-0.3	205	63,000	Long term average	64,133	155.34	low	53,457	233.41	-24%	14%	-22%
									medium	61,884	162.07		-21%
									high	74,602	97.77		-52%
20	Split up	6%	-0.5	205	67,000	Long term average	64,473	186.33	low	52,208	233.41	-9%	34%	4%
									medium	56,174	243.95		19%
									high	73,328	120.40		-41%
21	Split up	6%	-0.3	205	65,000	El Ninõ	71,025	128.08	low	54,597	242.89	-38%	18%	-15%
									medium	62,182	176.48		-14%
									high	75,353	103.46		-50%
22	Split up	6%	-0.3	205	65,000	La Ninã	61,184	195.63	low	51,844	270.80	-5%	32%	3%
									medium	56,138	223.64		9%
									high	67,336	139.15		-32%
23	Split up	6%	-0.3	205	65,000	5 worst inflows	54,595	258.42	low	48,115	289.43	26%	41%	7%
									medium	57,162	221.46		8%
									high	66,237	146.50		-29%
24	Split up	6%	-0.3	205	67,000	5 best inflows	90,006	69.45	low	55,485	231.64	-66%	13%	-20%
									medium	65,580	150.38		-27%
									high	72,655	112.43		-45%

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E-mail: rec@ie.ufrj.br

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[1] Corresponding author:
Richard L. Hochstetler Contact: richard@acendebrasil.com.br