Implications of the Winter Electricity Crisis
Abstract
The autumn and winter of 2001 was characterised by low rainfall in the hydro catchments. Storage levels fell rapidly and the price of electricity increased to many times the long run marginal cost of the most expensive generation. These high prices and the shortage cost the economy in the region of $200 million. Yet, all through this period, roughly 400 MW of available thermal generation was not being used.
The paper discusses the reason for the market failure and suggests ways of managing generation and supply to eliminate the risk of skyrocketing prices and to ensure that all available generation will be in service during a drought.