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Modeling the New Zealand Electricity Market

PDE and Applied Math Seminar

Speaker: Golbon Zakeri, Univ. of Auckland, New Zealand
Location: 1147 MSB
Start time: Tue, Oct 6 2009, 4:10PM

Joint work with Tony Downward and David Young

In April this year the New Zealand Commerce Commission released a review of the New Zealand Electricity Market (NZEM). This review, commonly referred to as the Wolak report, concluded that there was evidence of exercise of market power in the NZEM and was followed by a ministerial review of the NZEM. Both the Wolak report and the market review suggested a number of structural improvements for the NZEM. The likeliest structural change, suggest by both reviews, is a number of asset swap and divestiture option. I will present a review of the NZEM and the optimization and economic problems arising from it. I will talk briefly about the Wolak report and the background to the uggested structural changes from his report. I will then examine these suggestions in the frame work of simple Cournot models in presence of changing costs and line constraints. I will demonstrate that for our simple examples, these structural changes will achieve the opposite of what was intended!