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Spatial effects in the bid price setting strategies of the wholesale electricity markets: The case of Colombia

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  • John J. García

    ()

  • Jesús López-Rodríguez

    ()

  • Jhonny Moncada-Mesa

    ()

Abstract

Weather conditions in Colombia vary greatly throughout the territory and therefore the location of electricity generating plants plays a key role in their bid pricing strategies. To account for these location-specific pricing strategies this paper estimates a Spatial Durbin Model (SDM) with monthly data gathered from the 17th largest hydraulic electricity generating plants of Colombia on bid prices, generation, energy inputs and positive reconciliation over the period January 2005-August 2015 and controlling also for the system marginal prices and the economy cycle. The paper reports three main results. First, firms ? bid prices are negatively affected by the energy inputs of the rivals, second they are unaffected by positive reconciliation payments to the rivals and third they are negatively affected by the generation amounts of the rivals. One potential policy recommendation of these results is the need to implement balancing markets to signal more efficiently the pricing strategies in these markets.

Suggested Citation

  • John J. García & Jesús López-Rodríguez & Jhonny Moncada-Mesa, 2017. "Spatial effects in the bid price setting strategies of the wholesale electricity markets: The case of Colombia," Documentos de Trabajo CIEF 015660, Universidad EAFIT.
    • Handle: RePEc:col:000122:015660
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    File URL: https://repository.eafit.edu.co/handle/10784/11433#.WWk1YNPyvq0
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    Cited by:

    1. John J. García Rendón & Alex F. Pérez-Libreros, 2019. "El precio spot de la electricidad y la inclusión de energía renovable no convencional: evidencia para Colombia," Documentos de Trabajo CIEF 017393, Universidad EAFIT.

    More about this item

    Keywords

    Bid Price; wholesale electricity market; Spatial Durbin; Colombia;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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