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Two-settlement system for the Brazilian electricity market

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  • Munhoz, Fernando Colli

Abstract

The Brazilian cost-based market employs the single-settlement system to clear electricity. Besides single, this system adopts a hybrid mechanism in which the amount of electricity measured during production and consumption in the real-time market is cleared with the electricity price set during the operation's schedule in the day-ahead market. The result is that the intersection between demand and supply does not set the electricity price neither in the day-ahead market nor in the real-time market. This work studies the flaws of the Brazilian settlement system. The study demonstrates that the two-settlement system is a better option for this market because it prices the electricity correctly at the moment of production and consumption, encourages the market participants to furnish accurate data for the system operation, mitigates anti-competitive practices, and induces market efficiency.

Suggested Citation

  • Munhoz, Fernando Colli, 2021. "Two-settlement system for the Brazilian electricity market," Energy Policy, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:enepol:v:152:y:2021:i:c:s0301421521001038
    DOI: 10.1016/j.enpol.2021.112234
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    References listed on IDEAS

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    1. Jian Yao & Shmuel S. Oren & Ilan Adler, 2007. "Cournot equilibria in two-settlement electricity markets with system contingencies," International Journal of Critical Infrastructures, Inderscience Enterprises Ltd, vol. 3(1/2), pages 142-160.
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    4. Andrew Sweeting, 2007. "Market Power In The England And Wales Wholesale Electricity Market 1995-2000," Economic Journal, Royal Economic Society, vol. 117(520), pages 654-685, April.
    5. Peter Cramton, 2017. "Electricity market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 589-612.
    6. Frank A. Wolak, 2003. "Measuring Unilateral Market Power in Wholesale Electricity Markets: The California Market, 1998–2000," American Economic Review, American Economic Association, vol. 93(2), pages 425-430, May.
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    1. Marchetti, Isabella & Rego, Erik Eduardo, 2022. "The impact of hourly pricing for renewable generation projects in Brazil," Renewable Energy, Elsevier, vol. 189(C), pages 601-617.
    2. Silva, Walquiria N. & Rego, Erik Eduardo & Vieira, Giovani G.T.T. & Lourenço, Luís F.N. & Salles, Mauricio B.C., 2025. "An overview of Brazil's electricity market: Planning, dispatch models, pricing, and modernization," Utilities Policy, Elsevier, vol. 96(C).

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