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Dynamics of risk management tools and auctions in the second phase of the Brazilian Electricity Market reform

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  • de Souza, Fabio Cavaliere
  • Legey, Luiz Fernando Loureiro
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    Abstract

    In 2004, the reform of the Brazilian Electricity Market underwent a thorough revision. One of its causes was the electricity rationing that began in June 2001 and lasted until February 2002. Among other measures, the 2004 revision devised new mechanisms intended to reduce risks associated to contracts settled in electricity auctions and those related to investments in new generation plants. As 4 years have passed since the onset of the reform's revision, sufficiently enough data are now available for an analysis of the post-revision dynamics of the Brazilian Electricity Market. This is the purpose of the present paper. We focus on the dynamics of the different types of electricity auctions and on the so-called Mechanism for Compensation of Surpluses and Deficits, both created in the wake of the 2004 revision. The ultimate goal is to understand the behavior of the agents involved in auctions - notably buyers and sellers of electricity - and propose remedial actions to eliminate existing loopholes in the present regulatory framework. To achieve this goal, four steps were necessary. Firstly, a data base to support the analysis was built. Then, the main drivers of the dynamics of the risk management tools were identified. Finally, consequences of the implemented changes were discussed and corrections for observed pitfalls proposed.

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    File URL: http://www.sciencedirect.com/science/article/B6V2W-4Y23JVW-1/2/764a4a03f0e2c01373db987d3b97d6cd
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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 38 (2010)
    Issue (Month): 4 (April)
    Pages: 1715-1733

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    Handle: RePEc:eee:enepol:v:38:y:2010:i:4:p:1715-1733

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    Web page: http://www.elsevier.com/locate/enpol

    Related research

    Keywords: Electricity market Risk management Market dynamics;

    References

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    1. Mendonca, Augusto F. & Dahl, Carol, 1999. "The Brazilian electrical system reform," Energy Policy, Elsevier, vol. 27(2), pages 73-83, February.
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    Cited by:
    1. Erdogdu, Erkan, 2010. "Electricity Market Reform: Lessons for developing countries," MPRA Paper 27317, University Library of Munich, Germany.
    2. Erdogdu, Erkan, 2013. "Essays on Electricity Market Reforms: A Cross-Country Applied Approach," MPRA Paper 47139, University Library of Munich, Germany.

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