Learning from Developing Country Power Market Experiences : The Case of Colombia
The Colombian power market was established in 1995, driven primarily by concerns about the reliability of supply in the largely hydro-based domestic power system. The power sector reform was expected to help avoid blackouts by attracting private in...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/898231552316685139/Learning-from-Developing-Country-Power-Market-Experiences-The-Case-of-Colombia http://hdl.handle.net/10986/31397 |
| Summary: | The Colombian power market was
established in 1995, driven primarily by concerns about the
reliability of supply in the largely hydro-based domestic
power system. The power sector reform was expected to help
avoid blackouts by attracting private investment and
increasing the efficiency of existing capacity. However, two
decades after its inception, the market has not been
successful in providing reliable supply along competitive
outcomes. This paper analyzes the experience of Colombia
with power markets, including market design, implementation,
and outcomes. A single-node, bid-based market was
established overnight, with bilateral contracts among market
participants (mostly short-to-medium term). The original
regulated capacity payment was replaced in 2004 by a
reliability market intended to ensure supply during tight
hydrological conditions (mainly due to El Nino phenomena).
However, the Colombian power sector is currently showing
signs of structural weakness: the reliability market has
shown dysfunctionalities, the government has intervened the
market during critical situations, and concerns persist
regarding market power exercise. The experience of Colombia
is important for other developing countries, since it
highlights the challenges of designing and implementing a
power market that successfully provides reliability,
competitive outcomes, and sustainability. Although key local
hydrological conditions were considered in the design of
Colombia's capacity market, the market had difficulties
delivering intended outcomes due to design and institutional
issues, particularly the lack of a comprehensive approach to
gas supply and transport. |
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