Market Analysis provides bidding advice to AES Chivor in Colombia’s first auction for renewable energy

Market Analysis was retained by AES Chivor Colombia to assist in formulating AES’s bidding strategy in the Colombian auction for long-term renewable energy contracts held October 22, 2019. This auction was unusual in design. For buyers it was a straightforward single product, sealed-bid, average-price auction; for sellers it was a multiproduct, combinatorial, pay as bid auction. This design meant that an optimizing algorithm was required to find the auction solution for any set of simulated demand and supply bids.

Phase 1 of the project consisted in assembling information relating to the demand and supply curves expected to pertain to the auction process. Phase 2 involved a series of increasingly realistic mock auctions using the computer program for solving the auction made publicly available by the Ministerio de Minas y Energía. This program allowed us to simulate the auction using up to 15 seller bids in any round and up to six firms.