Electricity market regimes based on long term contracts : what lessons from the brazilian model ?

Abstract

Seminar around Dr. Mauricio TOLMASQUIM
President, Empresa de Pesquisa Energetica

June 6, 2013 18 :00 – 20 :00
University Paris-Dauphine
Salle Raymond ARON
2nd floor

The seminar will be held in French.

In electricity markets, long term coordination is supposed to be ensured by the hourly market prices which don’t in any way ensure the alignment of average annual prices with long term marginal cost, thus not favoring the start of new investment at high fixed cost. The problem is accentuated for countries with high growth rates and capitalistic hydraulic resources: they are exposed to long periods of low prices followed by shortages of hydraulic capacity that provoke a sharp price rise that lasts several months. Therefore it can’t be on the basis of the anticipation of scarcity rents, critical and aleatory, that investors can develop the equipment that best conforms to the research of the minimum social cost.

Brazil was able to adopt another market regime than that in place in European countries and the USA, founded on capacity planning and auctioning of long term contracts that ensure a revenue stream for capacity and energy, both for new equipment and existing equipment. Mauricio TOLMASQUIM, the principal coordinator of this reform, who is currently the president of Empresa de Pesquisa Energetica, the agency in charge of the programming of electricity capacity, will present this Brazilian reform based on the search for long term economic and social efficiency, as well as the results of this reform in terms of capacity development and cost and price control. Mauricio TOLMASQUIM has a doctorate in economics from the EHESS and wrote his thesis with the CIRED.