Competition in electricity markets versus competition for electricity supply: a comparative study of the Portuguese and the Brazilian regulatory models

• Type: Article in International Conference Proceedings Book
• Date: 2017

Authors

Joana Resende (Author) FEP; Aquino, T (Author) Other; de Castro, N (Author) Other; Aguiar, J (Author) Other

Conference proceedings International

Title: PROCEEDINGS OF THE 3RD INTERNATIONAL CONFERENCE ON ENERGY AND ENVIRONMENT (ICEE 2017)

Pages: 370-380

3rd Internacional Conference on Energy and Environment (ICEE) - Bringing Together Economics and Engineering

Porto, PORTUGAL, JUN 29-30, 2017

Indexing

ISI Web of Knowledge - 0 Citations

Other information

Authenticus ID: P-00P-QJX

Abstract (EN): The aim of this paper is to compare the electricity market design currently adopted in Portugal and in Brazil. We shed light on the differences and similarities between the two models regarding their rationale and risks. In particular, we highlight their differences regarding the organization of the wholesale and the retail activities: while the Portuguese model builds upon the pillars of competitive generation and retail, the Brazilian model is based on a centralized auction-contracting mechanism in the wholesale market and on captive consumption in the downstream market. We assess the advantages and disadvantages of each model by reviewing the theoretical and empirical literature on the benefits and limitations of retail choice and the literature on the pros and cons of electricity markets (in Portugal) versus contracts markets (in Brazil). The first approach yields competition in the market, whereas the second one fosters competition for electricity supply. We characterize the most stringent flaws in each model and we conclude that there is room for regulatory innovation in both models. The Portuguese model needs to be adjusted to create the necessary incentives to invest in the capacity that is needed to achieve the country's environmental and supply security goals. The Brazilian model already privileges investment incentives but it needs to be redesigned in order to account for the excessive risk allocated to distributors, which are quite vulnerable to exogenous shocks (e.g. hydrological shocks or demand-side macroeconomic shocks).

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 11