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The price impacts of the exit of the Hazelwood coal power plant

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  • Gonçalves, Ricardo
  • Menezes, Flávio

Abstract

This paper estimates the price impacts of the unanticipated closure of Hazelwood, a large brown coal power plant (1600 MW) in Victoria, Australia. We measure the total impact of the closure on prices in Australia’s National Electricity Market for each half-hour interval, and for each state, 12 months from closure. We also break down the impact into direct and indirect effects and find that the total impact of the closure on prices varies considerably across half-hours. The results vary not only in magnitude and across time, but also in statistical significance. Our estimates suggest an upper bound for the impact on the average half-hourly price of $24.02/MWh 12 months from closure, with a total market impact of $6,527.4 million. When we break down the total impact into direct and indirect effects, we find the latter to be the main driver of our results, through a reduction in the merit-order effect of wind generation.

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  • Gonçalves, Ricardo & Menezes, Flávio, 2022. "The price impacts of the exit of the Hazelwood coal power plant," Energy Economics, Elsevier, vol. 116(C).
    • Handle: RePEc:eee:eneeco:v:116:y:2022:i:c:s0140988322005278
    DOI: 10.1016/j.eneco.2022.106398
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    More about this item

    Keywords

    Electricity markets; Market impacts; Closure of coal power plant;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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