Abstract for: SD for assessing electricity market integration

Integration of electricity markets has started expanding under economic liberalization world-round. While some regions are managing better than others, lessons, both political as well as technical, highlight major challenges ahead to overcome. As in recent years, Panama, Colombia, Ecuador and Peru have decided to integrate their electricity markets; this will eventually create an enormous Latin American electricity exchange from Mexico to Chile. We developed a system dynamics model, linked to an iterative algorithm, to assess the likely effects of integration on both system expansion and security of supply. The model helps understanding the logic of the long-term system behavior under different policies, assuming Market Coupling as the dispatch mechanism. After analyzing simulations results under different scenarios, we conclude that integration of electricity markets may render great benefits regarding security of supply and efficiency; and consequently energy might be supplied at lower prices, using “cleaner” technologies. However, benefits largely depend on policy, regulation, and technical issues.