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ASSESSING THE INTEGRATION OF ELECTRICITY MARKETS USING PRINCIPAL COMPONENT ANALYSIS: NETWORK AND MARKET STRUCTURE EFFECTS |
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| Authors: | LEWIS EVANS GRAEME GUTHRIE STEEN VIDEBECK |
| Institution: | Evans:;Professor, School of Economics and Finance, Victoria University of Wellington, Wellington, New Zealand. Phone 644-463-5560 and 642-7456-5053, Fax 644-463-5014, E-mail Guthrie:;Professor, School of Economics and Finance, Victoria University of Wellington, Wellington, New Zealand. E-mail Videbeck:;Graduate student, Cornell University, Ithaca, NY. E-mail |
| Abstract: | Market power in electricity wholesale spot markets is more likely if there is market segmentation. We show that principal component analysis is a natural tool for the qualitative and quantitative assessment of the presence of local markets. We study whether the New Zealand market has been a national market or a set of local markets since its inception in 1996 and find that increased competition induced some segmentation that was eliminated by transmission enhancement and the introduction of generation downstream from the constrained circuits. Transmission investment policy that ensures one market will contribute to the efficiency of electricity, water, and related other markets. ( JEL D4, L1, L4) |
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