Contagions in interconnected power markets

Rangga Handika

Journal of Risk Finance, 2021, vol. 22, issue 3/4, 296-311

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.

Keywords: Power markets; Multinomial logit; Contagion; Price risk; Load risk; G12; G32; Q41 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:jrf-01-2021-0002

DOI: 10.1108/JRF-01-2021-0002

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