The evolution of electricity auctions in South America

ABSTRACT

Regulatory reforms of the power sectors in South America have always been driven by the need of attracting enough investment to guarantee an expansion rate capable of covering the fast-paced demand growth in the continent. In order to achieve this objective, in the last decade several countries in the region have reshaped their regulatory frameworks in the direction of long-term auctioning. This paper first provides a detailed description of the regulatory evolution that resulted in the implementation of auction schemes and then it presents an updated review of the mechanisms implemented in five South American countries, comparing their main design elements.

KEYWORDS:

• Capacity mechanisms
• electricity auctions
• long-term electricity contract
• system adequacy

Notes

¹ See Apergis and Payne (2013) for a detailed analysis of this correlation in the South American context.

² What are now termed “reliability options” were called “price risk-hedging contracts” in Pérez-Arriaga (1999).

³ The Argentinean Energy Plus auctions have not been included in this summary, because of the lack of executed tenders to date.