Transmission of prices and price volatility in Australian electricity spot markets: A multivariate GARCH analysis

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Title Transmission of prices and price volatility in Australian electricity spot markets: A multivariate GARCH analysis
Author Worthington, Andrew Charles; Kay-Spratley, Adam; Higgs, Helen
Journal Name Energy Economics
Editor Derek Bunn
Year Published 2005
Place of publication Guildford, Eng
Publisher Elsevier
Abstract This paper examines the transmission of spot electricity prices and price volatility among the five regional electricity markets in the Australian National Electricity Market (NEM): namely, New South Wales (NSW), Queensland (QLD), South Australia (SA), the Snowy Mountains Hydroelectric Scheme (SNO) and Victoria (VIC). A multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model is used to identify the source and magnitude of price and price volatility spillovers. The results indicate the presence of positive own mean spillovers in only a small number of markets and no mean spillovers between any of the markets. This appears to be directly related to the physical transfer limitations of the present system of regional interconnection. Nevertheless, the large number of significant own-volatility and cross-volatility spillovers in all five markets indicates the presence of strong ARCH and GARCH effects. This indicates that shocks in some markets will affect price volatility in others. Finally, and contrary to evidence from studies in North American electricity markets, the results also indicate that Australian electricity spot prices are stationary.
Peer Reviewed Yes
Published Yes
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Copyright Statement Copyright 2005 Elsevier. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
Volume 27
Issue Number 2
Edition 2005
Page from 337
Page to 350
ISSN 0140-9883
Date Accessioned 2006-07-04
Date Available 2015-05-04T22:04:04Z
Language en_US
Research Centre Griffith Asia Institute
Faculty Griffith Business School
Subject PRE2009-Time-Series Analysis
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1x

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