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Interconnectedness in the Australian National Electricity Market: A Higher-Moment Analysis

Journal Article


Abstract


  • © 2020 Economic Society of Australia We examine the risk transmission mechanisms in the interconnected Australian National Electricity Market (NEM). We illustrate that the transmission of extreme events should be considered in terms of their magnitude (via skewness) and the likelihood of their occurrence (via kurtosis) when promoting NEM interconnectedness. Our empirical findings suggest that interconnectedness costs can be limited by providing sufficient transmission capacity as it can expand generation capacity. Our results suggest that a 1 per cent increase in NEM generation capacity can decrease the transmission of these risks by between 0.9 and 1.7 per cent, depending on the moment of the electricity return distribution.

UOW Authors


  •   Do, Hung (external author)
  •   Nepal, Rabindra
  •   Smyth, Russell (external author)

Publication Date


  • 2020

Citation


  • Do, H., Nepal, R. & Smyth, R. (2020). Interconnectedness in the Australian National Electricity Market: A Higher-Moment Analysis. Economic Record,

Scopus Eid


  • 2-s2.0-85087925722

Place Of Publication


  • Australia

Abstract


  • © 2020 Economic Society of Australia We examine the risk transmission mechanisms in the interconnected Australian National Electricity Market (NEM). We illustrate that the transmission of extreme events should be considered in terms of their magnitude (via skewness) and the likelihood of their occurrence (via kurtosis) when promoting NEM interconnectedness. Our empirical findings suggest that interconnectedness costs can be limited by providing sufficient transmission capacity as it can expand generation capacity. Our results suggest that a 1 per cent increase in NEM generation capacity can decrease the transmission of these risks by between 0.9 and 1.7 per cent, depending on the moment of the electricity return distribution.

UOW Authors


  •   Do, Hung (external author)
  •   Nepal, Rabindra
  •   Smyth, Russell (external author)

Publication Date


  • 2020

Citation


  • Do, H., Nepal, R. & Smyth, R. (2020). Interconnectedness in the Australian National Electricity Market: A Higher-Moment Analysis. Economic Record,

Scopus Eid


  • 2-s2.0-85087925722

Place Of Publication


  • Australia