Learning from Developing Country Power Market Experiences: The Case of Colombia

# Table of Contents

|TABLE OF CONTENTS**.................................................................................................................................. II**|
|---|
|FIGURES**.................................................................................................................................................... II**|
|TABLES**..................................................................................................................................................... III**|
|ACRONYMS AND ABBREVIATIONS**.............................................................................................................. IV**|
|**1**<br>**INTRODUCTION................................................................................................................................. 5**|
|1.1<br>EVOLUTION PROCESS OF THECOLOMBIAN POWER MARKET............................................................................ 5|
|1.2<br>ARCHITECTURE AND STRUCTURE OF THECOLOMBIAN POWER MARKET.............................................................. 8|
|**2**<br>**PRECONDITIONS FOR POWER MARKETS .......................................................................................... 10**|
|2.1<br>POWERSYSTEM................................................................................................................................... 10|
|2.2<br>HYDROAVAILABILITY ANDFUELSUPPLY................................................................................................... 11|
|**3**<br>**MARKET DESIGN ............................................................................................................................. 13**|
|3.1<br>GENERATION SCHEDULING AND DISPATCH................................................................................................. 13|
|3.2<br>PRICE FORMATION............................................................................................................................... 14|
|3.3<br>DEMAND PARTICIPATION IN THE WHOLESALE MARKET................................................................................. 16|
|3.4<br>CONTRACTS AND BILATERAL TRADING....................................................................................................... 16|
|3.5<br>MARKET SETTLEMENT........................................................................................................................... 17|
|3.6<br>OVERVIEW OFMARKETDESIGN.............................................................................................................. 19|
|**4**<br>**CAPACITY MARKETS: RELIABILITY AUCTIONS AND RELIABILITY OPTIONS ......................................... 21**|
|4.1<br>DESIGN OF THERELIABILITYMECHANISM INCOLOMBIA............................................................................... 21|
|4.2<br>OUTCOMES OF THE RELIABILITY PAYMENTS AND FIRM ENERGY AUCTIONS........................................................ 25|
|**5**<br>**POWER MARKET IMPLEMENTATION ............................................................................................... 28**|
|5.1<br>MARKET GOVERNANCE.......................................................................................................................... 28|
|5.2<br>SUMMARY ANDINSTITUTIONAL INDICATORS FOR THECOLOMBIANPOWERMARKET......................................... 31|
|**6**<br>**POWER MARKET PERFORMANCE .................................................................................................... 34**|
|6.1<br>WHOLESALE ANDRETAILPRICES ANDMARKETEFFICIENCY.......................................................................... 34|
|6.2<br>INVESTMENT ANDSECURITY OFSUPPLY.................................................................................................... 46|
|6.3<br>SUSTAINABILITY................................................................................................................................... 49|
|6.4<br>SUMMARY.......................................................................................................................................... 50|
|**7**<br>**CONCLUSIONS ON THE EXPERIENCE OF COLOMBIA WITH POWER MARKET REFORMS ..................... 51**<br>**8**<br>**REFERENCES .................................................................................................................................... 53**|

# Figures

Figure 2-1 Evolution of Colombia’s domestic electricity demand. ................................................... 10 Figure 2-2 Structure of Colombia’s electricity demand during 2015. ............................................... 11 Figure 2-3 Share of installed capacity (in MW) per technology in Colombia, 2015. ......................... 11 ii