NEWS

Market Analysis has consulted with various Spanish energy companies on the details of the recently proposed Spanish electricity capacity market to be finalized later this year. The proposal is for a centralized capacity procurement auction as has been adopted in electricity markets in North America, Europe, South America and elsewhere. A pay-as-bid auction is being considered with a reserve price for existing generation plant, similar to that adopted in Belgium in 2021.
An important difference however, is that the reserve price is to be kept secret in an effort to induce more competitive bidding by existing plant. This is an interesting feature of the auction design which may prove risky for both the bidders in the auction and for the auctioneer, should it find itself committed to rejecting bids in the auction which are above the reserve price but well below the next available bids.
The consultation period for the proposal continues until the end of January.

Tony Curzon Price has worked as a staff economist at the Competition Commission, at the Competition and Markets Authority, as advisor to the Secretary of State for Business Energy and Industrial Strategy and in the Number 10 policy unit. He has a particular interest in public policy issues related to energy, environment, data, platforms and market power.

In 2024 Market Analysis was retained by a UK energy company to provide an analysis of bidding behaviour by renewable generators in the balancing market in the presence of Contracts for Difference (CfDs). The bidding behaviour of CfD supported renewable generators in the market has been under review by the UK’s energy regulator, Ofgem, for potential breaches of competition rules.

A nonconfidential version of our report is available here:  CfDs and the Balancing Mechanism

In 2022 Market Analysis collaborated with Europe Economics on the design of the initial auctions for the new EU emissions trading system covering fuel for buildings and road transport on behalf of the European Commission’s DG CLIMA. We are also collaborating on a market consultation and analysis of the participation of firms in the auctions and secondary markets.

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.

On the Enforcement of Trade Embargoes by the Merchant Guilds by Nils-Henrik von der Fehr and David Harbord, 25 April 2018.

Abstract: Compensation from rulers of trading centres to merchants whose property rights had been violated was a notable feature of early European international trade. We demonstrate in a repeated-game model that demands for compensation made threats by merchant guilds to impose trade boycotts self-enforcing for individual merchants, thus removing incentives for embargo breaking that could otherwise have rendered guilds powerless. Long-distance merchants were thus protected from predation by medieval city rulers, possibly providing a foundation for the trade expansion of the `Commercial Revolution’. We also address the frequently neglected issue of whether the guilds and cities would have agreed on the level of trade which they wished to support.

A report written for the Colombian Comision de Regulacion de Energía y Gas (CREG), November 2016.

Abstract: The Colombian Comision de Regulacion de Energia y Gas (CREG) convened a panel of international experts to consider various proposals for electricity market reform on four topics: (1) the scarcity price, reliability charge and methods for the expansion of system capacity; (2) a forward market for energy contracts (MOR); (3) spot market reform and the creation of day-ahead and intra-day markets; and (4) mechanisms to elicit investment in nonconventional renewable energy (FNCERs) in Colombia. This report contains my analysis and recommendations on these topics.

Comment on Ghang and Nowak’s “Indirect reciprocity with optional interactions” by David Harbord and Nils-Henrik von der Fehr, 24 July 2016.

Abstract: We point out some simple mathematical errors in the article “Indirect reciprocity with optional interactions” (Journal of Theoretical Biology 365 (2015) 1–11) by Whan Ghang and Martin Nowak, which invalidate many of their results and conclusions. We note various ways that these errors could be fixed, but all require fundamental revisions of their model and lead to counterintuitive conclusions. We also discuss their use of a Nash equilibrium (as opposed to an evolutionary stability) approach in deriving conditions for the evolution of cooperation with indirect reciprocity, and mention some precedents for their model which have appeared in the biology and economics literature.

An article published in openDemocracy “Bargaining post-Brexit trade deals: worse even than project fear”  by David Harbord & Tim Lord, 14 June 2016.

Abstract: Brexiteers hope to convince us that Britain will, after exit, be able to retain its status as a global trading nation with special deals with its largest trading partners in the EU and elsewhere. Remain has painted a bleak picture of what will happen to the economy if Britain exits. Applying some elementary game theory to post-Brexit negotiations suggests that things might be worse for an EU trade deal than even Remain’s so-called “project fear” is arguing.