Abstract

http://ssrn.com/abstract=906043
 
 

References (18)



 
 

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Assessing the Integration of Electricity Markets using Principal Component Analysis: Network and Market Structure Effects


Lewis T. Evans


Victoria University of Wellington - New Zealand Institute for Study of Competition and Regulation Inc. (ISCR)

Graeme Guthrie


Victoria University of Wellington - School of Economics & Finance

Steen Videbeck


Cornell University

May 31, 2006


Abstract:     
The major diffculties in assessing market power in electricity wholesale spot markets mean that great weight should be placed upon assessing market outcomes against the fundamental determinants of supply, demand and competition. In this spirit we study whether the New Zealand market has been a national market or a set of local markets since its inception in 1996. Electricity markets generally have loop flows that require simultaneous assessment of prices at all nodes, thereby limiting the informativeness of pair-wise nodal comparisons. We introduce principal component analysis to this application and show that it is a natural tool for the qualitative and quantitative assessment of the presence of local markets. We find that increased competition induced some separation into local markets that was eliminated by transmission enhancement and the introduction of generation downstream from the constrained circuits. For most of the period New Zealand has had one national market.

Number of Pages in PDF File: 22

Keywords: Electricity, Market power, Principal component analysis

JEL Classification: D4, L1, L4

working papers series


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Date posted: June 2, 2006  

Suggested Citation

Evans, Lewis T. and Guthrie, Graeme and Videbeck, Steen, Assessing the Integration of Electricity Markets using Principal Component Analysis: Network and Market Structure Effects (May 31, 2006). Available at SSRN: http://ssrn.com/abstract=906043 or http://dx.doi.org/10.2139/ssrn.906043

Contact Information

Lewis T. Evans (Contact Author)
Victoria University of Wellington - New Zealand Institute for Study of Competition and Regulation Inc. (ISCR) ( email )
Wellington 6001
New Zealand
64 4 4635562 (Phone)
64 4 4635566 (Fax)
Graeme Guthrie
Victoria University of Wellington - School of Economics & Finance ( email )
P.O. Box 600
Wellington 6001
New Zealand
64 4 463 5763 (Phone)
64 4 495 5014 (Fax)
HOME PAGE: http://contemporaryfinance.com/
Steen Videbeck
Cornell University ( email )
Ithaca, NY 14853
United States
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References:  18
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