Program on Energy and Sustainable Development (PESD) Director Frank Wolak and Associate Director Mark Thurber conducted a workshop on December 3-4 in Brasília, at the offices of Brazil's electricity regulator ANEEL. Regulatory staff used PESD's energy market game to explore what it would mean for the country to move from a cost-based to a bid-based electricity market. Brazil's electricity supply is dominated by hydroelectric power, and a shift to a bid-based market could help the country manage variable hydro output. At the same time, regulators have to make sure the incentives of participants in a bid-based market are set so they align with desired social outcomes. By playing the roles of generating companies in the energy market game, regulators at ANEEL gained a deeper understanding of what these incentives would be under different market configurations -- and specifically, the workshop examined the relative strengths and weaknesses of capacity markets and forward contracts as mechanisms for ensuring resource adequacy in a high-renewables world.
