The Centre for Market design is a partnership between the University of Melbourne, the Commonwealth Treasury and the Victorian Department of Treasury and Finance. The Centre’s energy market program looks at market challenges around next generation electricity – including applied research in the area of market failure, market design, information and incentive problems underlying areas of public policy.
The Institute seeded the Centre’s energy market program and provided support for Lecturer in Energy Market Design position held by Dr Leslie Martin. In 2012, Dr Martin began research in the project ‘Real-time pricing and competition in the retail electricity market’. This project explores how regulatory policies, that make detailed residential meter data available to retailers, may affect customer screening in the retail electricity market. The research will focus on identifying which customers will choose to switch to time-of-use pricing and how that selection will affect contracts offered to customers that want to remain on flat rates.
This project uses a cross-disciplinary approach that combines economic models of competitive screening and market unraveling with an understating of Victoria’s residential electricity markets. Research questions relating to energy have previously been studied exclusively by disciplines within Engineering. This project however examines the economical aspects of this problem, and uses structural econometric techniques.
This project is an example of the synergies between the Institute and Department of Economics that arise from economists’ methodologies for dealing with strategic interaction between firms, such as large power generators, which are a key characteristic of energy markets. Further, the technical skills of the Melbourne School of Engineering and graduate students complement the computational aspects of both estimating demand and supply elasticities and modeling strategic interaction amongst large power generators in the Australian energy market. This co-operation creates the opportunity for research that is of high value for policymakers and academics alike.
More information about this program is available on the Centre for Market Design website.