Testing for Market Integration in the Australian National Electricity Market
The National Electricity Market was established in 1998 as a response to the overall deregulation and restructuring of the Australian electricity sector. The wholesale market integration effects of this establishment, however, remain to be examined. We use pairwise unit root tests, cointegration analyses and a time varying coefficient model to determine the level and study the development of market integration in the regionally separate but interconnected markets in Australia. The results from the pairwise unit root tests provide a mixed evidence of price convergence while cointegration analyses does not clearly reject the absence of persistence price differences across the physically interconnected regions. The results from the time-varying coefficient model suggest an integrating market for electricity in Australia although full market integration has not been achieved yet. The results suggest the presence of significant transmission bottlenecks across the inter-regional interconnectors. Our results from cointegration analysis also supports the findings by Gonzalo and Lee (1998) that a proper use of the Johansen cointegration analysis requires a deeper data analysis than just the standard unit root tests.
|Date of creation:||Dec 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +61 7 3365 6570
Fax: +61 7 3365 7299
Web page: http://www.uq.edu.au/eemg
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Malaguzzi Valeri, Laura, 2009.
"Welfare and competition effects of electricity interconnection between Ireland and Great Britain,"
Elsevier, vol. 37(11), pages 4679-4688, November.
- Laura Malaguzzi Valeri, 2008. "Welfare and Competition Effects of Electricity Interconnection between Great Britain and Ireland," Papers WP232, Economic and Social Research Institute (ESRI).
- Bernard, A.B. & Durlauf, S.N., 1994.
"Interpreting Tests of the Convergence Hypothesis,"
9401r, Wisconsin Madison - Social Systems.
- Worthington, Andrew & Kay-Spratley, Adam & Higgs, Helen, 2005.
"Transmission of prices and price volatility in Australian electricity spot markets: a multivariate GARCH analysis,"
Elsevier, vol. 27(2), pages 337-350, March.
- Andrew C. Worthington & Adam Kay-Spratley & Helen Higgs, 2002. "Transmission of prices and price volatility in Australian electricity spot markets: A multivariate GARCH analysis," School of Economics and Finance Discussion Papers and Working Papers Series 114, School of Economics and Finance, Queensland University of Technology.
- Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Christopher B. Barrett & Jau Rong Li, 2002. "Distinguishing between Equilibrium and Integration in Spatial Price Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 292-307.
- Brunekreeft, G. & Newbery, D., 2005.
"Should Merchant Transmission Investment be Subject to a Must-offer Provision?,"
Cambridge Working Papers in Economics
0534, Faculty of Economics, University of Cambridge.
- Gert Brunekreeft & David Newbery, 2006. "Should merchant transmission investment be subject to a must-offer provision?," Journal of Regulatory Economics, Springer, vol. 30(3), pages 233-260, November.
- Mackinnon, J.G. & Haug, A.A. & Michelis, L., 1996.
"Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration,"
96a09, Universite Aix-Marseille III.
- MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-77, Sept.-Oct.
- James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- De Vany, Arthur S. & Walls, W. David, 1999. "Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US," Energy Economics, Elsevier, vol. 21(5), pages 435-448, October.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Neuhoff, Karsten & Newbery, David, 2005. "Evolution of electricity markets: Does sequencing matter?," Utilities Policy, Elsevier, vol. 13(2), pages 163-173, June.
- John Foster & Melvin Hinich & Phillip Wild, 2008.
"Randomly Modulated Periodic Signals in Australias National Electricity Market,"
Energy Economics and Management Group Working Papers
2-2008, School of Economics, University of Queensland, Australia.
- John Foster & Melvin J. Hinich & Phillip Wild, 2008. "Randomly Modulated Periodic Signals in Australias National Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 105-130.
- Zachmann, Georg, 2008. "Electricity wholesale market prices in Europe: Convergence?," Energy Economics, Elsevier, vol. 30(4), pages 1659-1671, July.
- Growitsch, Christian & Stronzik, Marcus & Nepal, Rabindra, 2012. "Price convergence and information efficiency in German natural gas markets," EWI Working Papers 2012-5, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
- Gonzalo, Jesus & Lee, Tae-Hwy, 1998.
"Pitfalls in testing for long run relationships,"
Journal of Econometrics,
Elsevier, vol. 86(1), pages 129-154, June.
- Wild, Phillip & Hinich, Melvin J. & Foster, John, 2010.
"Are daily and weekly load and spot price dynamics in Australia's National Electricity Market governed by episodic nonlinearity?,"
Elsevier, vol. 32(5), pages 1082-1091, September.
- Phillip Wild & Melvin J. Hinich & John Foster, 2008. "Are Daily and Weekly Load and Spot Price Dynamics in Australia’s National Electricity Market Governed by Episodic Nonlinearity?," Discussion Papers Series 368, School of Economics, University of Queensland, Australia.
- Higgs, Helen & Worthington, Andrew, 2008. "Stochastic price modeling of high volatility, mean-reverting, spike-prone commodities: The Australian wholesale spot electricity market," Energy Economics, Elsevier, vol. 30(6), pages 3172-3185, November.
When requesting a correction, please mention this item's handle: RePEc:qld:uqeemg:11-2013. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SOE IT)
If references are entirely missing, you can add them using this form.