For several years the electricity market has been ‘skating’ in the definition of a permanent energy contract auction mechanism for the regulated market (homes and small businesses), which is anonymous and standardized, in search of a fixed price that is not to the swing of the stock market. Wilman Garzón, vice president of Energy Markets of the Colombian Mercantile Exchange, explains how the platform operates, whose operation in this market depends on the endorsement of the Energy and Gas Regulation Commission (Creg).
(See: Lack of gas in Colombia has companies on the brink of an energy crisis).
How is the start of the standardized market for regulated contracts going?
Awaiting approval from the Creg. The country needs a centralized platform, a Corabastos of term contracts where everyone who wants to be hired can come and find that much more stable offer. It is extremely important for the user, because when a marketer relies on these daily operations on the stock market, he assumes the risk and transfers it to the clients and therefore there are a lot of industrialists today paying extremely high rates. We hope that the majority of energy will actually be resolved in these forward markets and that the stock market will be a balancing market.
Is the idea that from 2025 they will be that channel that treats customers equally in price?
As it is. Now with the platform of the Colombian Mercantile Exchange, it will be the first time that Colombia has a completely standardized energy supply contract. Second, with access because there are many agents who want to buy energy but do not even receive an offer. And, third, today there is price discrimination and these platforms make the price unique and 100% of the transactions are assigned indiscriminately to all actors at those prices. It is so important that it has been diagnosed for years, but we have gotten tangled up with the implementation.
(See: Government will assume $2.7 billion of rate options for strata 1, 2 and 3).
Will the deployment be full or gradual?
We are fully ready because the platform we launched in 2023 has already been running with two auctions in the unregulated market. At this moment, 12 market agents are already trading with us and are only trading one additional product, which is the regulated market. Within these agents there are several that provide support, such as Enel, AES Chivor, several project developers and there are several marketers.
Wilman Garzon Private file
What will the standards be?
Of course, prices are not standardized, but the platform allows the confluence of buyers, who say price and quantity, and sellers, who put their own offers of available quantities and price. And the platform matches all expectations and from there an agreement is derived in a contract. It becomes more efficient because all supply and demand come together. The first thing that is standardized is the contract as such, in the terms, and the possibility of management and assignments under inefficient conditions or under conditions that are not typical of the markets is avoided. Another element is the standardization of the product, because you can buy energy that is generated during certain hours of the day such as solar energy. The best thing is that you know exactly what the product is like, that everyone trades the same product and thus the growth of liquidity and the ease of exchanging positions taken are encouraged.
(See: The atypical situation that led to suspending operation at the Chivor hydroelectric plant).
How many standard products do you have ready?
We have three standard products: the product in which the same energy is delivered 24 hours a day and which has a flat curve. Another is a product that delivers energy only when there are sunny hours, similar to what the Ministry did with the last auction, and of course the complementary product is the delivery of energy during non-solar hours. They are well tested in the rest of the world.
How to protect them from delays due to social or permit issues?
This requires that there be additional elements to the auction itself. The fact that electrical infrastructure projects are not moving forward is similar to Regiotram and we are having many discussions around social and environmental viability. The Upme has played a very interesting role, it has a series of maps and has tried to do its best to identify the regions that have that balance between high energy potential but low environmental impact.
(See: IEA: investment in clean energy will double that of fossil fuels in 2024).
How much have prices been limited in the world with these schemes?
The International Renewable Energy Agency, in 2022, analyzed the results of the Colombian auction. Things like Law 1715 are transcendental, since they bring very tangible, economic benefits, and therefore all of this will be reflected in a lower development cost and of course a lower final price. Having low-cost resources is really one of the main advantages we have in Colombia as we have wind, sun, large amounts of hydrology and we have gas. The element that is having a lot of influence is that we have not been able to resolve the Caribbean coast. There are concerns about some initiatives that have come from both government institutions and some operators, especially those affected, who tend to simply think about how to socialize this allocation of higher costs versus what was available before.
(See: What does the regional electricity market consist of that the Andean countries seek to implement).
ÓMAR G. AHUMADA ROJAS
General Editor Portfolio
