PDI Aneel Project - Market Security

Since 2020, Navarra has been co-executor of the Aneel R&D project “Diffusion analysis of counterparty financial default risk and investigation of mitigating measures in the decentralized commercialization of electricity in the Brazilian market” (PD-00387-0720/2020) together with the company MRTS (Consultoria e Engenharia Ltda.) and the CCEE (Electric Energy Trading Chamber), and financed by the proponent Rio Paranapanema (CTG Brasil).

This project aims to analyze the impacts of measures proposed to increase market security in the electricity sector. Using agent models, a technique regularly used in economics to analyze complex environments, we carried out simulations of the bilateral electricity trading market. This way we can visualize not only the physical settlement that occurs at CCEE, but also how exposures can form over the duration of the contract since the negotiation itself.

Through this mechanism we will be able to show the likely impacts on liquidity, transaction costs and the benefits for systemic risk of regularly suggested measures such as leverage limits, margin allocation (according to different methodologies), early termination of contracts, and many others.