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Swapping Generators' Assets: Market Salvation or Wishful Thinking?

Anthony Downward, David Young, and Golbon Zakeri

Year: 2011
Volume: Volume 32
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No2-2
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Abstract:
The idea of rearranging generation assets amongst firms to improve competition has once again surfaced in a recent report on improvements to the New Zealand Electricity Market. We present counterexamples to show that rearranging assets, either with asset divestiture to a new firm, or asset swaps between existing firms, may actually reduce competition in electricity markets. Our examples emphasize features that are particular to electricity, such as seasonality and transmission constraints. These results warn that applying economic rules of thumb to electricity markets may lead to erroneous conclusions.



The Effect of Transmission Constraints on Electricity Prices

Adam E. Clements, A. Stan Hurn, and Zili Li

Year: 2017
Volume: Volume 38
Number: Number 4
DOI: 10.5547/01956574.38.4.acle
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Abstract:
Electricity prices in an interconnected market are influenced by the occurrence of transmission constraints. Until relatively recently, however, the important effects of transmission constraints on both the trajectory and volatility of electricity prices have not played a large role in empirical models of prices. This paper explores the contribution to price volatility in the Queensland electricity market made by transmission constraints. It is found that robust estimation techniques are necessary to guard against incorrect inference in time series models using electricity price data in which severe price spikes occur. The main empirical lesson is that transmission constraints contribute significantly both to the level and variability of price and consequently the performance of a price forecasting model is likely to be improved by incorporating information on transmission constraints. While the general tenor of this conclusion will come as no surprise, the extent and the importance of these effects found in this paper for forecasting price and for computing summary measures like Value-at-Risk serve as a timely reminder to practitioners.





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