Risk asymmetries in hydrothermal power generation markets

Electricity Price Fundamentals in Hydrothermal Power Generation Markets Using Machine Learning and Quantile Regression Analysis

“…According to Mosquera-López et al (2017a), when the thermal generation plants are on, they present marginal costs of up to 300%, higher than hydropower plants. Therefore, the marginal generation costs show a relevant difference between the two most important generation technologies, which explains the price fluctuations.…”

“…On the other hand, the market structure and generation technologies are fundamentals factors in the price formation. Based on a particular case of a hydrothermal power generation market which presents: (i) significant differences in the marginal costs of the generation sector; (ii) a small renewable generation capacity; (iii) a strong dependence on exogenous variables as fossil fuel prices and climatology factors; and, where (iv) the risk and uncertainty are higher for market agents, it has been observed that these features cause further increased in price variability (Mosquera-López et al, 2017a;Fernández-Blanco et al, 2017;Cotia et al, 2019). Hence, it is relevant to recognize the determinants that explain the electricity price behavior in this market structure.…”

Determinantes del Precio de la Electricidad en Mercados No Regulados: Un Análisis Bibliométrico

“…According to (68,69) , the inception of smart grids and renewable integration has increased the uncertainty on some market indicators as the spot price, demand, and supply. For example, renewable energies can reduce price volatility in Hydrothermal power markets (70) . Thus, the bibliometric analysis showed that approximately 60% of the papers of the last five years had the price forecast as the main objective (29,66,(71)(72)(73)(74) .…”

“…Colombia has many studies about price dynamics since its energy market is based on hydrothermal power generation. Hydropower represents close to 70% of energy production and the rest depends on thermal power for periods of high demand or temperature shocks (70) . The studies showed that variables such as electricity demand and supply, reservoir levels, weather, fuel prices, power transmission failures, energy policy, bilateral contracts, and agent strategies are fundamentals to determine spot price structure (4,(93)(94)(95)(96)(97) .…”

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

“…For example, fee freezes or payment deferrals for up to 36 months were applied on the final users' consumption tariff [38]. Despite this, the electricity market is based on a hydrothermal generation system characterized by significant differences in the marginal costs in the generation sector, a high dependence on water reservoirs and fossil fuels, minimal renewable power capacity, and a high uncertainty due to the exogenous factors [39][40][41]. Hence, it is relevant to evaluate the electricity spot price dynamics and the uncertainty in the electricity market caused by the quarantine.…”