Good Volatility, Bad Volatility: What Drives the Asymmetric Connectedness of Australian Electricity Markets?

Nicholas Apergis, Jozef Barunik, Marco Chi Keung Lau

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

Efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests are the main objectives and the strategies of a national electricity market, while the main interests of generators are to maximize their profit through pricing strategies. Therefore, the objective of this study is to explore whether electricity prices across the four Australian States display symmetric price volatility connectedness. The study is the first attempt in the literature to make use of intraday 5-min Australian dispatch electricity prices, spanning the period December 8th, 1998 to May 5th, 2016 to quantify asymmetries in volatility connectedness emerging from good, and bad volatility. The results provide supportive evidence that the Australian electricity markets are connected asymmetrically implying the presence of some degree of market power that is exercised by generators across regional electricity markets.
LanguageEnglish
Pages108-115
Number of pages8
JournalEnergy Economics
Volume66
Early online date22 Jun 2017
DOIs
Publication statusPublished - Aug 2017
Externally publishedYes

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Electricity
Profitability
Power markets
Connectedness
Electricity market
Costs
Generator
Electricity price
Market power
Profit
Pricing strategy
Price volatility
Asymmetry

Cite this

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title = "Good Volatility, Bad Volatility: What Drives the Asymmetric Connectedness of Australian Electricity Markets?",
abstract = "Efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests are the main objectives and the strategies of a national electricity market, while the main interests of generators are to maximize their profit through pricing strategies. Therefore, the objective of this study is to explore whether electricity prices across the four Australian States display symmetric price volatility connectedness. The study is the first attempt in the literature to make use of intraday 5-min Australian dispatch electricity prices, spanning the period December 8th, 1998 to May 5th, 2016 to quantify asymmetries in volatility connectedness emerging from good, and bad volatility. The results provide supportive evidence that the Australian electricity markets are connected asymmetrically implying the presence of some degree of market power that is exercised by generators across regional electricity markets.",
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Good Volatility, Bad Volatility: What Drives the Asymmetric Connectedness of Australian Electricity Markets? / Apergis, Nicholas; Barunik, Jozef; Lau, Marco Chi Keung.

In: Energy Economics, Vol. 66, 08.2017, p. 108-115.

Research output: Contribution to journalArticle

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AU - Barunik, Jozef

AU - Lau, Marco Chi Keung

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N2 - Efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests are the main objectives and the strategies of a national electricity market, while the main interests of generators are to maximize their profit through pricing strategies. Therefore, the objective of this study is to explore whether electricity prices across the four Australian States display symmetric price volatility connectedness. The study is the first attempt in the literature to make use of intraday 5-min Australian dispatch electricity prices, spanning the period December 8th, 1998 to May 5th, 2016 to quantify asymmetries in volatility connectedness emerging from good, and bad volatility. The results provide supportive evidence that the Australian electricity markets are connected asymmetrically implying the presence of some degree of market power that is exercised by generators across regional electricity markets.

AB - Efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests are the main objectives and the strategies of a national electricity market, while the main interests of generators are to maximize their profit through pricing strategies. Therefore, the objective of this study is to explore whether electricity prices across the four Australian States display symmetric price volatility connectedness. The study is the first attempt in the literature to make use of intraday 5-min Australian dispatch electricity prices, spanning the period December 8th, 1998 to May 5th, 2016 to quantify asymmetries in volatility connectedness emerging from good, and bad volatility. The results provide supportive evidence that the Australian electricity markets are connected asymmetrically implying the presence of some degree of market power that is exercised by generators across regional electricity markets.

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