Interconnectedness in the Australian national electricity market: A higher moment analysis

Hung Do, Rabindra Nepal and Russell Smyth

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We examine the risk transmission mechanisms in the interconnected Australian National Electricity Market (NEM). We illustrate that the transmission of extreme events in terms of their magnitude (via skewness) and the likelihood of their occurrence (via kurtosis) should be considered when promoting NEM interconnectedness. Our empirical findings suggest that interconnectedness costs can be limited by providing sufficient transmission capacities as it can expand generation capacity. Our results suggest that a one percent increase in NEM generation capacity can decrease the transmission of these risks by between 0.9 percent and 1.7 percent, depending on the moment of the electricity return distribution.

Keywords: Australian National Electricity Market; Higher moments; Spillovers; Interconnectedness; Long memory (search for similar items in EconPapers)
JEL-codes: C32 L51 L94 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2020-05
New Economics Papers: this item is included in nep-ene, nep-ore and nep-reg
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Interconnectedness in the Australian National Electricity Market: A Higher‐Moment Analysis (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2020-49

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