Managing the risk of price spikes, dependences and contagion effects in australian electricity markets

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Australian electricity markets are more volatile and spike-prone than other comparable markets. Price spikes account for large parts of total price variation, and companies that are unprepared to manage these risks adequately face potentially substantial losses. The economic reality of price spikes in our interconnected electricity markets which are small and geographically isolated, unlike the proximate markets of Europe and North America, emphasises the imperative of this Australian-focused research. Results will enable forecasting of extreme prices and enable market participants to manage better their risks, in Australia's unique electricity environment, and reduce chances of large losses or default.