During 2015 and 2016, Colombia suffered one of the strongest El Niño phenomenon recorded to date. Precipitations stayed in historical lows for a long period of time, leading an electrical system depended in hydro sources in... [ view full abstract ]
During 2015 and 2016, Colombia suffered one of the strongest El Niño phenomenon recorded to date. Precipitations stayed in historical lows for a long period of time, leading an electrical system depended in hydro sources in to a financial and physical crisis. To avoid this kind of situations, in 1996 and later modified in 2006, an expansion mechanism was proposed to provide firm energy to the system. The generators were paid constantly to make this energy available throughout scarcity events, and then sell it a price that reflected the cost of the most inefficient plant of the system in 2006. Thermal generators, those using liquid fossil fuels, denied the services during the El Niño crisis arguing that the mentioned scarcity price did not reflect their variable costs. The situation was finally solved with government intervention, an emergency demand respond program and a lot of carbon emissions due to the hydro power that was replaced for conventional generation for more than six months. The modifications to the capacity mechanism presented in this article, designed with the main objective of avoiding similar crisis in the future, change the auction in which the energy firm requirements are assigned. With the idea that it remains technology neutral, an agent offers in the new auction two values that more accurately represent the project; a premium for its firm energy and a scarcity price. This information is later analyzed in an independent and technical organism where each agent is evaluated with the ideas of James B. Bushnell and Shmuel S. Oren shown in the paper Bidder Cost revelation in Electric Power Auctions. This performance function rewards plants with low scarcity price because their energy is available a greater percentage of the time, having a constant effect on the spot price of the system. Additionally, a pollution term is added to include the carbon costs of the firm energy produce in a plant. The results is a mechanism that would help renewable generation, as is expected that their participation in the auction comes along with a high prime, due to their also great installation costs, a low scarcity price and minimum emissions costs. Using LCOE methodology, and available data for the Colombian Market, a different range of technologies are evaluated with the auction function. Renewable plants in general but especially the ones with a high capacity factor, like geothermal, are benefit in the methodology. This change in the capacity mechanism would help to incentivize these sources that currently have no participation in the Colombian system.
Key words: Capacity mechanism, Energy auction, El Niño phenomenon, Renewable energy sources, Colombia.
3b Mitigating climate change (prevention and energy efficiency / biomass for energy / wind
