Contagions in interconnected power markets

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
JournalJournal of Risk Finance
DOIs
Publication statusAccepted/In press - 2021

Keywords

  • Contagion
  • Load risk
  • Multinomial logit
  • Power markets
  • Price risk

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