In the middle of 2020 the country was coming from very dry months and the level of reservoirs was decreasing worryingly. The Ministry of Mines and Energy requested the collaboration of Quantil to measure the systemic risk presented by the situation and to participate together with two other expert consultants in the energy market in the design of regulatory schemes to mitigate the risk.
Quantil developed a (stochastic) projection model of the stock market price and variables related to energy supply such as reservoir levels. This allowed projecting (with uncertainty) reservoir levels and generating thousands of simulated scenarios to detect the percentage in which the system would run out of capacity to meet demand, even considering the entry into generation of plants with firm energy obligations. This platform made it possible to analyze probabilities of adverse events, identify the generators that contributed most to this systemic risk and translate them into monetary variables, taking advantage of external studies of rationing costs. On the other hand, together with the other consultants, we proposed incentive schemes for the generators through new designs of the Reliability Charge that would allow mitigating the systemic risk, for example, preventing hydraulic generators from postponing their generation (possibly causing stress in the system) to strategize the use of water for their own benefit.
The conclusions and recommendations were presented and accepted by the Ministry. However, the weather situation soon improved and the situation was no longer urgent enough for permanent changes to be made.
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