Schedule meeting
Use cases

Guarantee Scheme for the Long-Term FNCER Auction

We model the long-term contracting auction in the Wholesale Energy Market of the Colombian Ministry of Mines.

Seeking to facilitate the entry of complementary energies to those existing in the market, we calculated the risk that different guarantee schemes would bring to the different agents involved. This analysis was carried out jointly for the five types of guarantees: seriousness for generators and marketers, start-up, compliance and payment.

Approach

For the development of this research it is necessary to identify the Risk Factors to which the agents - energy generators and traders - participating in the auction are exposed, these are the IPP, IPC, Exchange Rate, interest rates, energy price, replacement price and power factors of solar and wind power plants.
Subsequently, assumptions are made about the guarantee scheme faced by the agents that want to participate in the auction and based on this, the number of agents that effectively participate in the auction is estimated, as a function of the defined scheme. This function was calibrated based on the result of the first auction of this style, which was declared successful. Additionally, it is defined that the number of traders depends exclusively on the payment guarantees, while the number of generators depends on the payment and compliance guarantees. Once the number of agents is defined, the result of the auction is approximated, based on the result of the first auction.
However, the decisions made by the generators and traders have an impact on other generators, traders, the Government and the consumers that make up the system. How are the guarantees scheme optimally chosen?
First, Risk Factor simulations are used to determine in which cases the generators and marketers default on their obligations acquired in the auction, and when an agent defaults, the cost incurred by its counterpart to replace the contract is quantified.
Second, the risk faced by the Nation is limited to consider the effective installed capacity, considering only guarantee schemes that allow an effective installed capacity above a threshold defined by the Ministry of Mines and Energy.
Finally, the guarantee scheme with the lowest aggregate risk is chosen, understanding the latter as the sum of the risks faced by each agent in the system.

Results

We were able to model the long-term contracting auction, calculating the risk of the different agents involved in the guarantee schemes. Developing a scheme to optimally choose the collateral scheme.

“ Everything should be made as simple as possible, but not simpler ”
A. Einstein
“ The eternal mystery of the world is its comprehensibility ”
A. Einstein
“ Mathematics is like sexual pleasure, orgasm, only lasting longer ”
André Weil
“ Sometimes attaining the deepest familiarity with a question is our best substitute for actually having the answer ”
B.Greene
“ One cannot help having the gut feeling that a real understanding of our universe must somehow involve E_8 [a Lie group comprising a system of 240 vectors in 8–dimensional space] ”
Bertram Kostant
“ Thus mathematics may be defined as the subject in which we never know what we are talking about, nor whether what we are saying is true ”
Bertrand Russell
“ The moment will come when the sun will shine only on a planet of free men, knowing only reason as their master ”
Codorcet
“ Applied mathematics is not a definable scientifc field but a human attitude ”
Courant
“ Every problem in the calculus of variations has a solution, provided the word solution is suitably understood ”
D. Hilbert
“ Reason is, and ought to be the slave of the passions ”
David Hume
“ We have found that where science has progressed the farthest, the mind has but regained from nature that which the mind has put into nature. We have found a strange foot–print on the shores of the unknown ”
Eddington
“ The simplicities of natural laws come through the complexities of the language we use for their expression ”
Eugene Wigne
“ ..ten thousand years from now there can be little doubt that the most significant event of the 19th century will be judged as Maxwell’s discovery of the laws of electrodynamics ”
R. Feynman
“ Since all models are wrong the scientist cannot obtain a “correct” one by excessive elaboration. On the contrary following William of Occam he should seek an economical description of natural phenomena ”
G. Box
“ Just as the ability to devise simple but evocative models is the signature of the great scientist so overelaboration and overparameterization is often the mark of mediocrity ”
G. Box
“ In truth mathematics can be called the Pleasure Garden of the myriad forms, the Erudite Ocean of Hundred Schools of Philosophy ”
Xu Guangpi
“ Applied mathematics is the bridge connecting pure mathematics with science and technology ”
Prager
“ I have finished a monument more lasting than bronze and higher than the royal structure of the pyramid ”
Scarf
“ Truth and Clarity are Complementary ”
Niels Bohr
“ It is the glory of science to be of no use…[its true aim]… is to honor of the human spirit ”
Carl Gustav Jacobi
Previous
Next

Other projects

In Projects, you can learn about real applications of our services, use cases and examples of them.

Pensiones1

Contractual Design for the Management of FONPET

Energia_electrica

Systemic Risk of Electricity Supply

planes-desarrollo1

Inventory Logistics - Multimodal Transportation

transporte_multimodal1

Integrated Development Plans

estrategia_de_deuda_banner

Ministry of Finance and Public Credit (MHCP) defines a Debt Management Strategy

reportes

Asset Allocation Model in an insurance company