Effects of the COVID-19 Pandemic on the Spot Price of Colombian Electricity

Abstract

COVID-19 disease shocked global economic activity and affected the electricity markets due to lockdown and work-from-home policies. Therefore, this study proposes an empirical analysis to identify the electricity spot price response during the preventive and mandatory insulation in Colombia, where the economic contraction caused the largest decrease in the electricity demand, especially in the industrial sector. The methodology applied was quantile regression to quantify the non-linear effect on the spot price returns, and two sample periods were selected to contrast the results: 2018 and 2019. The main findings showed that regulated demand variation caused the highest variability on the spot price dynamic during the strict quarantine. However, the price could not fully capture the effects of the demand change due to the short duration of the shock and, also, the price variability in 2019 was higher than 2020 by an El Niño shock.

Directional Spillover of Fossil Fuels Prices on a Hydrothermal Power Generation Market

“…The sample period was selected due to the data available with no methodological changes, and the current supply scheme for the generation sector is included (CREG 051 of 2009, article 10). Likewise, 2020 data were not selected because the Colombian electricity demand decreased significantly during the first quarterly of the COVID-19 pandemic, and the fossil fuel prices slumped, especially the oil prices that reached negative values (Hendrawaty et al, 2021;Oviedo-Gómez et al, 2021b). Thus, Table 2 describes the variables, specifying data sources and units.…”

“…The Colombian electricity matrix is structured by 68% of hydric sources and 31% of thermal sources. Besides, renewable sources such as wind and solar represent only 0.21% (Oviedo-Gómez et al, 2021b). Therefore, this electricity market is defined as a hydrothermal market, which is characterized by significant differences in the marginal costs of the generation sector, a heavy dependency on weather factors and fossil fuel prices, and a small renewable generation capacity (Fernández-Blanco et al, 2017;Mosquera-López et al, 2017).…”

“…Therefore, the electricity price reached a peak. On the other hand, during 2018 and 2019, the highest total connectedness measure (32%) was observed because of the ENSO effect and energy commodity demand and supply fluctuations(Oviedo-Gómez et al, 2021b).…”