Structural Breaks and Electricity Prices

Further Evidence on the Role of Climate Policy Uncertainties in the Australian Electricity Market

Nicholas Apergis, Marco Chi Keung Lau

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

The primary objectives and the strategies of a national electricity market are the efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests. Therefore, the objective of this study is to explore whether electricity prices across the six Australian States display instability. Such instability is closely associated with the presence of structural breaks in relevance to policy events on Australian carbon policies. The study makes use of weekly Australian wholesale electricity prices spanning the period from June 8th, 2008 to March 30th, 2014 along with linear and non-linear unit root testing methodologies. The results provide supportive evidence that the Australian electricity market can be described as a less stable electricity market, which implies that a high degree of market power is exercised by generators across regional markets. These findings are expected to have substantial consequences for the effectiveness of carbon dioxide mitigating policies, especially, when there is uncertainty as to whether the planned environmental policy is put in place for the lifespan of undertaken investments.
Original languageEnglish
Pages (from-to)176-182
Number of pages7
JournalEnergy Economics
Volume52
Issue numberA
Early online date31 Oct 2015
DOIs
Publication statusPublished - Dec 2015
Externally publishedYes

Fingerprint

Electricity
Carbon dioxide
Carbon
Testing
Uncertainty
Power markets
Policy uncertainty
Electricity market
Electricity price
Climate policy
Structural breaks
Carbon policy
Market power
Life span
Unit root testing
Methodology
Environmental policy
Generator

Cite this

@article{2f93d4805a50467b8eb68518f25c639c,
title = "Structural Breaks and Electricity Prices: Further Evidence on the Role of Climate Policy Uncertainties in the Australian Electricity Market",
abstract = "The primary objectives and the strategies of a national electricity market are the efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests. Therefore, the objective of this study is to explore whether electricity prices across the six Australian States display instability. Such instability is closely associated with the presence of structural breaks in relevance to policy events on Australian carbon policies. The study makes use of weekly Australian wholesale electricity prices spanning the period from June 8th, 2008 to March 30th, 2014 along with linear and non-linear unit root testing methodologies. The results provide supportive evidence that the Australian electricity market can be described as a less stable electricity market, which implies that a high degree of market power is exercised by generators across regional markets. These findings are expected to have substantial consequences for the effectiveness of carbon dioxide mitigating policies, especially, when there is uncertainty as to whether the planned environmental policy is put in place for the lifespan of undertaken investments.",
keywords = "Electricity prices, Structural breaks, Climate policy uncertainty, Australia",
author = "Nicholas Apergis and Lau, {Marco Chi Keung}",
year = "2015",
month = "12",
doi = "10.1016/j.eneco.2015.10.014",
language = "English",
volume = "52",
pages = "176--182",
journal = "Energy Economics",
issn = "0140-9883",
publisher = "Elsevier",
number = "A",

}

TY - JOUR

T1 - Structural Breaks and Electricity Prices

T2 - Further Evidence on the Role of Climate Policy Uncertainties in the Australian Electricity Market

AU - Apergis, Nicholas

AU - Lau, Marco Chi Keung

PY - 2015/12

Y1 - 2015/12

N2 - The primary objectives and the strategies of a national electricity market are the efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests. Therefore, the objective of this study is to explore whether electricity prices across the six Australian States display instability. Such instability is closely associated with the presence of structural breaks in relevance to policy events on Australian carbon policies. The study makes use of weekly Australian wholesale electricity prices spanning the period from June 8th, 2008 to March 30th, 2014 along with linear and non-linear unit root testing methodologies. The results provide supportive evidence that the Australian electricity market can be described as a less stable electricity market, which implies that a high degree of market power is exercised by generators across regional markets. These findings are expected to have substantial consequences for the effectiveness of carbon dioxide mitigating policies, especially, when there is uncertainty as to whether the planned environmental policy is put in place for the lifespan of undertaken investments.

AB - The primary objectives and the strategies of a national electricity market are the efficient delivery of network services and the electricity infrastructure to meet the long-term consumer's interests. Therefore, the objective of this study is to explore whether electricity prices across the six Australian States display instability. Such instability is closely associated with the presence of structural breaks in relevance to policy events on Australian carbon policies. The study makes use of weekly Australian wholesale electricity prices spanning the period from June 8th, 2008 to March 30th, 2014 along with linear and non-linear unit root testing methodologies. The results provide supportive evidence that the Australian electricity market can be described as a less stable electricity market, which implies that a high degree of market power is exercised by generators across regional markets. These findings are expected to have substantial consequences for the effectiveness of carbon dioxide mitigating policies, especially, when there is uncertainty as to whether the planned environmental policy is put in place for the lifespan of undertaken investments.

KW - Electricity prices

KW - Structural breaks

KW - Climate policy uncertainty

KW - Australia

UR - https://www.journals.elsevier.com/energy-economics/

U2 - 10.1016/j.eneco.2015.10.014

DO - 10.1016/j.eneco.2015.10.014

M3 - Article

VL - 52

SP - 176

EP - 182

JO - Energy Economics

JF - Energy Economics

SN - 0140-9883

IS - A

ER -