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Contagions in interconnected power markets

Author

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  • Rangga Handika

Abstract

Purpose - This paper offers an alternative approach to assessing contagions in price and load in the Australian interconnected power markets. This approach enabled us to identify a high-risk region and assess the direction of contagions from both buyers' and sellers' perspectives. Design/methodology/approach - The author used a multinomial logit method to measure contagions. Having identified the exceedance and coexceedances, the author estimated the multinomial logit coefficients of the covariates explaining the probability of a certain number of coexceedances. Findings - Market participants should recognize the presence of contagion risk and scrutinize price and load dynamics in the NSW and VIC regions to anticipate any simultaneous extreme changes. Regulators need to stabilize the demand and supply sides in those regions to minimize any possible contagions. Originality/value - This paper presents a pioneering study investigating contagion in the Australian interconnected power markets.

Suggested Citation

  • Rangga Handika, 2021. "Contagions in interconnected power markets," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 22(3/4), pages 296-311, October.
    • Handle: RePEc:eme:jrfpps:jrf-01-2021-0002
    DOI: 10.1108/JRF-01-2021-0002
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    More about this item

    Keywords

    Power markets; Multinomial logit; Contagion; Price risk; Load risk; G12; G32; Q41;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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