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Price dispersion in Australian retail electricity markets

Author

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  • Nelson, Tim
  • McCracken-Hewson, Eleanor
  • Whish-Wilson, Patrick
  • Bashir, Stephanie

Abstract

Simshauser and Whish-Wilson (2017) examined the restructured Victorian retail electricity market and found it to be efficient as the marginal unit produced was sold at marginal cost. This article extends their analysis of price dispersion by considering the heterogeneous nature of electricity consumption when measured by volume sold (kWh). We find that customers on ‘standing offer’ tariffs use 18% less electricity than customers on ‘high discount’ products, indicating the presence of market segmentation and implicit second-degree price discrimination. Climate change policy and the emergence of new technologies such as household solar PV, battery storage and home energy management systems will create further price dispersion in Australian electricity markets due to even greater product heterogeneity. We contend that policy makers will need to facilitate, rather than prevent, both price and tariff structure dispersion with the objective of improving consumer outcomes.

Suggested Citation

  • Nelson, Tim & McCracken-Hewson, Eleanor & Whish-Wilson, Patrick & Bashir, Stephanie, 2018. "Price dispersion in Australian retail electricity markets," Energy Economics, Elsevier, vol. 70(C), pages 158-169.
    • Handle: RePEc:eee:eneeco:v:70:y:2018:i:c:p:158-169
    DOI: 10.1016/j.eneco.2017.12.026
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Han, Lin & Kordzakhia, Nino & Trück, Stefan, 2020. "Volatility spillovers in Australian electricity markets," Energy Economics, Elsevier, vol. 90(C).
    2. Sulaima, Mohamad Fani & Dahlan, Nofri Yenita & Yasin, Zuhaila Mat & Rosli, Marlinda Mohd & Omar, Zulkiflee & Hassan, Mohammad Yusri, 2019. "A review of electricity pricing in peninsular Malaysia: Empirical investigation about the appropriateness of Enhanced Time of Use (ETOU) electricity tariff," Renewable and Sustainable Energy Reviews, Elsevier, vol. 110(C), pages 348-367.
    3. Esplin, Ryan & Davis, Ben & Rai, Alan & Nelson, Tim, 2020. "The impacts of price regulation on price dispersion in Australia's retail electricity markets," Energy Policy, Elsevier, vol. 147(C).
    4. Ya-Ling Chiu & Jiangze Du & Jying-Nan Wang, 2022. "The Effects of Price Dispersion on Sales in the Automobile Industry: A Dynamic Panel Analysis," SAGE Open, , vol. 12(3), pages 21582440221, August.
    5. Fange, Kari-Anne, 2022. "Electricity retailing and price dispersion," Energy Economics, Elsevier, vol. 106(C).
    6. Nong, Duy & Nguyen, Duong Binh & Nguyen, Trung H. & Wang, Can & Siriwardana, Mahinda, 2020. "A stronger energy strategy for a new era of economic development in Vietnam: A quantitative assessment," Energy Policy, Elsevier, vol. 144(C).
    7. Nelson, Tim & McCracken-Hewson, Eleanor & Sundstrom, Gabby & Hawthorne, Marianne, 2019. "The drivers of energy-related financial hardship in Australia – understanding the role of income, consumption and housing," Energy Policy, Elsevier, vol. 124(C), pages 262-271.
    8. Byrne, David P. & Martin, Leslie A., 2021. "Consumer search and income inequality," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    9. Thomasi, Virginia & Siluk, Julio Cezar M. & Rigo, Paula D. & Pappis, Cesar Augusto de O., 2024. "Challenges, improvements, and opportunities market with the liberalization of the residential electricity market," Energy Policy, Elsevier, vol. 192(C).

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    More about this item

    Keywords

    Electricity markets; Price discrimination; Energy policy;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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