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Integration of regional electricity markets in Australia: A price convergence assessment

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  • Apergis, Nicholas
  • Fontini, Fulvio
  • Inchauspe, Julian

Abstract

From an electricity market design perspective, it is relevant and practical to know which market structures allow for price convergence, and how long this takes to achieve. This study employs the Phillips and Sul (2007, 2009) methodology to test for the convergence of wholesale electricity prices across the Australian States. We identify a long-run, common price growth pattern that applies to a cluster formed by three Eastern States that share common market characteristics and limited physical interconnection. We also find another cluster with less competitive market structures that, although not interconnected, strongly converge towards their own trend. These findings confirm theoretical expectations while quantifying the rate of convergence. Finally, we also investigate the role that the carbon tax regime has played in the convergence process, with new empirical showing that the previous results are not affected, with the notable exception being the case of South Australia.

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  • Apergis, Nicholas & Fontini, Fulvio & Inchauspe, Julian, 2017. "Integration of regional electricity markets in Australia: A price convergence assessment," Energy Economics, Elsevier, vol. 62(C), pages 411-418.
    • Handle: RePEc:eee:eneeco:v:62:y:2017:i:c:p:411-418
    DOI: 10.1016/j.eneco.2016.06.022
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    References listed on IDEAS

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    Cited by:

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    14. Abdullah, Mohammad & Abakah, Emmanuel Joel Aikins & Wali Ullah, G M & Tiwari, Aviral Kumar & Khan, Isma, 2023. "Tail risk contagion across electricity markets in crisis periods," Energy Economics, Elsevier, vol. 127(PB).
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    More about this item

    Keywords

    Electricity prices; Price convergence; Australia; Clustering groups approach;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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