Paragraphs

This report points out a number of aspects of the existing electricity market design in Colombia that could be contributing to the periods of high short-term prices observed several times since early December of 2008. These issues are classified into four broad categories: (1) system-wide market power issues, (2) local market power issues, (3) market monitoring issues, and (4) broader electricity market issues.

 

All Publications button
1
Publication Type
Working Papers
Publication Date
Journal Publisher
Program on Energy and Sustainable Development
Authors
Frank Wolak
Paragraphs

In this report we identify the key drivers of observed market outcomes in the Colombian electricity supply industry during the fourth quarter of 2015 and first quarter of 2016, the time period covered by the most recent El Niño Event. We analyze how effective the market rules and market structure of Colombian electricity supply industry are in managing El Niño Events. The performance of the Reliability Payment Mechanism (RPM) is a major focus of this report because of its designation as the primary mechanism for ensuring an adequate supply of energy at a reasonable price during El Niño Events. We find that the RPM creates a number of perverse economic incentives for supplier behavior, particularly if suppliers have a significant ability to exercise unilateral market power, that works against the RPM mechanism ensuring an adequate supply of electricity at a reasonable price during El Niño Events. We identify several features of the RPM that make it extremely challenging even for a modified version of this mechanism to achieve its goal. We propose an alternative mechanism for ensuring an adequate supply of energy at a reasonable price during El Niño Events that should be straightforward to implement under the current market design in Colombia.

All Publications button
1
Publication Type
White Papers
Publication Date
Journal Publisher
Program on Energy and Sustainable Development
Authors
Frank Wolak
Paragraphs

Capacity markets provide guaranteed payments to electricity generation unit own- ers for having the “firm capacity” to produce electricity. Historically, these markets are plagued by the weak incentives they provide for plants to be available during high-demand hours. The reliability payment mechanism in the Colombian electricity market provides market-based incentives for plants to produce during periods of system scarcity. This market has served as a model for the design of capacity markets in a number of jurisdictions in North America and Europe. We demonstrate severe shortcomings of this mechanism. By adjusting their price and quantity offers, genera- tors with the ability to exercise unilateral market power can choose whether or not a scarcity condition exists. We find that this mechanism can make it privately profitable for a firms to withhold output and create a scarcity condition. We illustrate this prob- lem using hourly data from the first ten years of operation of the reliability payment mechanism in Colombia. The mechanism not only fails to minimize the cost of meeting electricity demand but also creates perverse incentives for electricity generators that could reduce the reliability of electricity supply. We quantify the cost of the perverse incentives caused by this capacity payment mechanism by computing a counterfactual dynamic oligopoly equilibrium for the 2015–16 El Niño event in Colombia.

All Publications button
1
Publication Type
Working Papers
Publication Date
Journal Publisher
Program on Energy and Sustainable Development
Authors
Frank Wolak
Paragraphs

Electricity tariff reforms will be an essential part of the clean energy transition. Existing tariffs rely on average cost pricing and often set a price per unit that exceeds marginal cost. The higher price encourages over-adoption of residential solar panels and under-adoption of electric alternatives to fossil fuels. However, an efficient tariff based on fixed charges and marginal cost pricing may harm low-income households. We propose an alternative methodology for setting fixed charges based on the predicted willingness-to-pay of each household. Using household data from Colombia, we show the fiscal burden and economic inefficiency of the existing tariffs. We then show how our new tariff methodology could improve economic efficiency and create incentives for the adoption of clean energy technologies, while still leaving low-income households better off.

All Publications button
1
Publication Type
Working Papers
Publication Date
Journal Publisher
Program on Energy and Sustainable Development
Authors
Frank Wolak
Paragraphs

The electricity supply industry in a low-carbon world will have over 50 percent share of intermittent renewables.  This large share of intermittent renewables will require investments in both grid-scale and distributed storage, active demand-side participation by customers, and automated distribution network monitoring and on-site load-shifting technologies.  Market design should support business models that lead to adoption of these pricing policies and technologies.  The policy question is what long-term resource adequacy mechanism will facilitate a least-cost transition to this future electricity supply industry with these pricing policies and technologies?

All Publications button
1
Publication Type
Commentary
Publication Date
Authors
Frank Wolak
Paragraphs

This report provides recommendations on the six topic areas in the transformation and modernization theme “Competition, participation and structure of the electricity market.” These are: (1) investment, reliability charges, and contracts; (2) generation diversification, of Non-Conventional Renewable Energy Sources (NCRES) and greater number of agents; (3) new services and agents: storage systems and aggregators; (4) restrictions, nodal prices and infrastructure; (5) market structure; and (6) pathways to de-carbonization and implications for market design. These recommendations are aimed at enhancing the efficiency of the short-term electricity market design and the long-term resource adequacy process in Colombia. They also provide policy pathways for the government of Colombia to support the deployment of NCRES, the entry of new market participants and technologies, and the active participation of final consumers in the wholesale market in manner that increase the competitiveness of wholesale and retail market outcomes.

 

All Publications button
1
Publication Type
Working Papers
Publication Date
Journal Publisher
Program on Energy and Sustainable Development
Authors
Frank Wolak
Paragraphs
The global cities of Latin America - Rio de Janeiro, Ciudad Juarez, Tijuana, Mexico City and Medellin - have become engines of economic growth. These cities attract remarkable talent across all levels and build extensive networks that allow for innovation and the circulation of ideas. But crime, violence and the dissolution of the social fabric threaten the main attraction of these cities and significantly undermine development prospects. The challenge of providing policing that protects citizens, especially those living in the poorest neighborhoods where gangs and other criminal organizations tend to concentrate, is daunting. The conference on violence and policing in Latin America and US cities brought together academics, policy makers, NGOs, and citizens to reflect on how cities in Latin America are meeting the challenges of rising
criminal violence. Particular focus was given to the “policing” processes in cities that have experienced and successfully reduced civil war-like levels of violence. The goal was to reflect on the dynamics and varieties of security strategies, police reform and efforts to rebuild the social fabric of major cities. The conference was hosted by the Program on Poverty and Governance (PovGov) at Stanford's Center on Democracy, Development, and the Rule of Law (CDDRL). Other centers and institutions at Stanford University that co-sponsored the conference include the Center for Latin American Studies (CLAS), the Bill Lane Center for the American West, the Mexico Initiative’ at the Freeman Spogli Institute for International Studies (FSI), and the Center for International Security and Cooperation (CISAC).
 
For a complete conference overview, please click here
 
All Publications button
1
Publication Date
Authors
Veriene Melo
-

Abstract: What happens to armed organizations after they sign peace accords? Why do they remilitarize or demilitarize? This project provides an explanation for this variation in post-war trajectories based on the geography of recruitment – whether the armed groups recruited locally or non-locally. The theory’s mechanisms center on social networks, principal-agent problems, and information asymmetries. I link these factors to changes in the distribution of power and the likelihood of successful bargaining, resumed violence or consolidated peace. The empirics draw on the comparative laboratory of contemporary Colombia where 37 armed organizations signed peace accords with the government and then diverged in their post-war trajectories: half remilitarized, half demilitarized. Drawing on data from eleven surveys collected over the course of ten years, I analyze how ex-combatants were networked in geographical space over time. I then examine the implications of cohesive or eroded networks on remilitarization using organization-level data derived from intelligence agencies and municipality-level data on 29,000 violent events over the course of 46 years of war. The project then turns to process tracing in various regions of Colombia, employing over 300 in-depth interviews to illustrate the validity of the causal process. The empirics provide strong support for the theory and cast doubt on explanations centered on the political economy of violence and correlates of civil war. The project has important implications for future research on civil wars, intrastate peace processes, and state formation and outlines a series of recommendations for policy.

About the Speaker: Sarah Daly is Assistant Professor of Political Science at University of Notre Dame. Her research interests include civil wars and peace-building, international security, and ethnic politics with a regional focus on Latin America. Her book manuscript, under contract with Cambridge University Press, explores the post-war trajectories of armed organizations. Her other research seeks to explain sub-national variation in insurgency onset, organized crime and state-building, recidivism of ex-combatants during war to peace transitions, state strategies towards ethnic minorities in the former Soviet Union, and the role of emotions in transitional justice regimes. Her research has been published in the Journal of Peace Research, British Journal of Political Science, Comparative Politics, Conflict, Security & Development, and in several edited volumes. Sarah has conducted field research in Colombia, Ecuador, Chile and Brazil, is a Term Member of the Council on Foreign Relations, and has spent time at the World Bank, Organization of American States, and Peace Research Institute of Oslo. She has also served as a fellow in the Political Science Department and at the Center for International Security and Cooperation at Stanford University, at the Saltzman Institute of War & Peace Studies at Columbia University, and at the Belfer Center for Science and International Affairs at Harvard University. Her research has been funded by the Swedish Ministry of Foreign Affairs, Mellon Foundation/American Council of Learned Societies, Social Science Research Council, National Science Foundation, Harry Frank Guggenheim Foundation, Smith Richardson Foundation, Fulbright Program, United States Institute of Peace, MIT Center for International Studies, and MIT Entrepreneurship Center.

Encina Hall (2nd floor)

Sarah Daly Assistant Professor of Political Science Speaker Kellogg Institute for International Studies, University of Notre Dame
Seminars
Authors
News Type
News
Date
Paragraphs

Scholars, law enforcement officials, business leaders and community activists will meet next week at Stanford to examine violence and policing in Latin American and the United States.

A two-day conference beginning April 28 will highlight the work of entrepreneurs and grassroots organizations trying to reduce violence and rebuild civil society. The gathering is hosted by the Program on Poverty and Governance (PovGov) at the Center on Democracy, Development and the Rule of Law. It is hosted in partnership with the Bill Lane Center for the American West, the Center for Latin American Studies, the ‘Mexico Initiative’ at the Freeman Spogli Institute for International Studies (FSI) and the Center for International Security and Cooperation.

"Violence linked to drug trafficking, gang wars and criminality is one of the leading barriers to development that effects the lives of millions in Latin America,” said Beatriz Magaloni, an associate professor of political science who directs PovGov, a program that studies the links between public action, goverance and poverty.

“The conference brings together people who have dealt with these problems in cities in Latin America and in the U.S. Seldom is the case that we bring to campus practitioners with first-hand experience dealing with some of the most pressing problems the hemisphere is confronting,” said Magaloni, who is also a senior fellow at FSI. 

The first day of the conference will feature a panel with Jose Galicot, the driving force of Tijuana Innovadora, a movement that helped Tijuana recover from devastating criminal activity and violence the last four years. Galicot will be joined by Jailson Silva, from Observatório of Favelas, one of the most reputable grass-roots organizations in the slums of Rio that undertakes research, consultancy and public actions focused on the city's favelas.

Many violence-plagued cities in the U.S. have implemented innovative initiatives to address the challenge that have included community policing tools and youth violence interventions. Similar initiatives are also taking place in Latin America with varying degrees of success. One of the goals of the conference is to get practitioners to share their experiences and best practices to reduce violence in major cities.

One of three featured keynote speakers, Sergio Fajardo, the current governor of Antioquia, Colombia, will speak on April 29 and help build the foundation for such dialogue. From 2003 to 2007, Fajardo implemented an effective strategy to reduce the level of violence in Medellin while he was mayor of the Colombian city.

By providing alternatives to illicit work, allocating resources to the most disadvantage areas, reclaiming public spaces and fostering dialogue among different sectors of society to create a sense of collective ownership, Fajardo transformed Medellin.

The two other keynotes include Mariano Beltrame, minister of security of Rio de Janeiro who is credited for the enactment and implementation of the Pacification Police Unites to reduce violence in the favelas of the city and Hector Robles, major of the municipality of Zapopan who has implemented various innovative policies to give better opportunities to the youth in Mexico, including an initiative called Jovenes con Porvenir (Youth with a Bright Future). 

The conference will also bring together police chiefs from Brazil and the U.S. to share their experiences and insights on grassroots implementation of initiatives designed to reduce violence. General Commander of Operations, Coronel Paulo Henrique, from the military police of Rio de Janeiro, Brazil, and Chief Eric Jones from Stockton, CA will be speaking on a panel titled, “’Pacification’ Strategies and Policing” on day two of the conference. Tony Farrar, chief of police for the city of Rialto, CA will be joined by Robert Chapman, deputy director of Community Policing Advancement and others to present on police accountability and gang violence in the U.S shortly thereafter.  

The conference will build upon a PovGov research project that is focused on the Brazilian military police in Rio de Janeiro. Targeting an important initiative in the city's favelas, the "Pacifying Police Units", the ongoing project investigates the use of lethal force by the police and reforms aimed at controlling violence.

A number of conference sessions will be led by CDDRL faculty members and affiliates, including: FSI Director Mariano-Florentino Cuéllar; Francis Fukuyama, the Olivier Nomellini Senior Fellow; FSI senior fellow and CDDRL affiliated faculty member Alberto Díaz-Cayeros; and former President of Peru and CDDRL Visiting Lecturer Alejandro Toledo. A conference report will be made available following the event.

Sessions will be held at Stanford University's Bechtel Conference room in Encina Hall on Monday, April 28 and the Alumni Center on Tuesday, April 29.  All sessions are free and open to the public. Please RSVP here to attend. A complete agenda can be found here.

For conference updates via Twitter please visit #PovGov

All News button
1
Paragraphs

Abstract:

Why have militarized interventions to curtail violence by drug cartels had wildly divergent results? In the past six years, state crackdowns drove a nine-fold increase in cartel-state violence in Mexico, versus a two-thirds decrease in Brazil. Prevailing analyses of drug wars as a criminal subtype of insurgency provide little traction, because they elide differences in rebels’ and cartels’ aims. Cartels, I argue, fight states not to conquer territory or political control, but to coerce state actors and influence policy outcomes. The empirically predominant channel is violent corruption— threatening enforcers while negotiating bribes. A formal model reveals that greater state repression raises bribe prices, leading cartels to fight back whenever (a) corruption is sufficiently rampant, and (b) repression is insufficiently conditional on cartels’ use of violence. Variation in conditionality helps explain observed outcomes: switching to conditional repression pushed Brazilian cartels into nonviolent strategies, while Mexico’s war “without distinctions” inadvertently made fighting advantageous.

All Publications button
1
Publication Type
Working Papers
Journal Publisher
CDDRL Working Papers
Authors
Subscribe to Colombia