Cointegration to estimate long-term electricity prices in periods of rationing: The case of the brazilian hydrothermal system

The objective of this paper is to present a methodology to estimate the price curve of electricity during periods of energy deficit. This study is based on long-term cointegration relationships between the gross domestic product and the consumption of electricity in Brazil. The methodology estimates the price for each percentage unit deficit, thereby giving a curve with levels of deficit that can vary from 1% to 100%, in contrast to the current curve of prices in deficit, which is restricted to four levels. Prices in deficit are important parameters exogenous to the chain of models for planning the operation of electric power in Brazil, so the application of this methodology should have a positive impact on the calculation of marginal costs of operation and expansion, as well as on the calculation of the spot price. (C) 2014 Elsevier B.V. All rights reserved.