Mercado electrico en Panama

Dispatch Control
Generat or 1A (Diesel)

Centro Nacional de Despacho

Dispatch Control
Generat or 1B (Diesel)

Generat or 2A (HFO)

PPA PPA

PPA PPA

Generat or 2B (HFO)

Generat or 3A (Coal)

PPA

Distribution company A

Distribution company B

PPA

Generat or 3B (Coal)

PPA
Generat or 4A (Wind)

PPA PPA PPA

Generat or 4B (Wind)

Generat or 5A (Hydro)

Generat or 5B (Hydro)

Premise 1
All Distribution Companies (DISCOS) should be 100% covered for their future long term (LT) demand expectations through LT PPAs with the Generation Companies (GENCOS). GENCOS ought to participate in all PPA Solicitations for 100% of their uncontracted capacity (save for 10% of Reserve Capacity)

Premise 2
Dispatch center is totally independent from DISCOS. GENCOS send on a daily basis their PPA prices and Marginal Costs to the Dispatch Center. Dispatch Center, independently from the contracts signed between the GENCOS and the DISCOS, will dispatch the energy following costs and availability merit order. GENCOS must be able to justify their cost and prices at all times, and allow for cost audits. If their ask price is higher than the real justifiable cost, they could be penalized and not be allowed to participate in future tenders or in the spot market.

What happens in reality?

Actual Demand curve may be different from Planned Demand curve, and peaks of demand may occur (somehow predictable). Hydrology or wind may perform different than expected (somehow predictable) GENCOS may have troubles or incidents that they need to sort our and would prevent them from

What to do then?
All Demand must be 100% fully covered in all cases. To prevent high electricity prices and reduce uncertainty, the DISCOS review the planned demand curve regularly, and issue Short Term (ST) PPAs solicitations to cover the demand variations in the short term. To this ST PPAs all GENCOS must participate also with 100% of their uncontracted capacity (i.e. for GENCOS that have their LT PPA expiring, GENCOS that have excess capacity that didnt make it into the LT PPA bid due to high pricesetc)

What to do then?
Short term and predictable variations from Planned Demand curve are therefore managed through ST PPAs. Nevertheless there are still unpredictable variations that do occur. These variations are dealt with through bilateral electricity exchange transactions (known as spot market).

Example 1 : Hydro deficiency (drought, etc)

Genco 3 is not available CND dispatches Genco 1 and 2 to cover demand (they would not have been dispatched if it were not because Genco 3 failed to generate) Since CND dispatched Genco 1 to cover demand, the spot price is Gencos 1 marginal cost. Genco 3 has to pay both Genco 2 and Genco 1 for having covered its shortage.
1. 2. 3. Genco 3 pays Genco 2 the equivalent to Genco 1s marginal cost (spot price) Genco 3 pays Genco 1 its marginal cost (spot price) Genco 3 fullfiled its obligation to the Disco with whom they have a PPA. The Disco pays Genco 3 the contracted PPA price. Genco 3 has a deficit of $80MWh for the electricity generated by Genco 1 and Genco 2 on its behalf. Genco 2 has a surplus of $30/MWh which is the differential between its marginal cost and the Spot price Genco 1 was made whole. It received exactly its Marginal cost.
Generator 3 ($120/Mwh)) Generator 2 ($170/Mwh ) Generator 1 ($200/MWh )

+ $30/Mwh

Generator 2 ($170/Mwh )

Generator 1 ($200/MWh )

4. 5. 6.

$200/MWh = ($80/MWh)

Generator 3 ($120/Mwh))

$200/MWh = ($80/MWh)

$120/MWh PPA price Distribution company

Example 2 : Technical Failure

Genco 2 is not available CND dispatches Genco 3 (which has excess capacity to serve, its 10% reserve capacity and better hydro) and Genco 1 to cover demand Since CND dispatched Genco 1 to cover demand, the spot price is Gencos 1 marginal cost. Genco 2 has to pay both Genco 3 and Genco 1 for having covered its shortage.
1. 2. 3. Genco 2 pays Genco 3 the equivalent to Genco 1s marginal cost (spot price) Genco 2 pays Genco 1 its marginal cost (spot price) Genco 2 fullfiled its obligation to the Disco with whom they have a PPA. The Disco pays Genco 2 the contracted PPA price. Genco 2 has a deficit of $30MWh for the electricity generated by Genco 3 and Genco 1 on its behalf. Genco 3 has a surplus of $80/MWh which is the differential between its marginal cost and the Spot price Genco 1 was made whole. It received exactly its Marginal cost.
Generator 2 ($170/Mwh)) Generator 3 ($120/Mwh ) Generator 1 ($200/MWh )

+ $80/Mwh

Generator 3 ($120/Mwh )

Generator 1 ($200/MWh )

4. 5. 6.

$200/MWh = ($30/MWh)

Generator 2 ($170/Mwh))

$200/MWh = ($30/MWh)

$170/MWh PPA price Distribution company

Current environment
Regulator is establishing a top price (precio de referencia) on the PPA solicitations to reduce speculation in the market. The amount of capacity that will be left uncontracted and available to play in the spot market for each one of the Gencos will be minimal:
Reserve Capacity Higher Efficiency Increased resources (more rain, wind, etc)

Regulator is trying to reduce the number of Thermal plants in the system. Last tender, by establishing a very low reference price, most thermals remained out of the PPA, which allows them (particularly if they have all their debt paid for and dont need capacity price) to sell freely all their capacity in the spot market at high prices. The mechanism is not perfect, but it should work over time once all generators are contracted for LT PPAs