Descripción de principales herramientas y equipos para

In this paper, we took the consideration of the stylised features of the spikes and the time- varying mean in the Australian electricity prices and employed a three-regimes HSMM to analyse the hidden regimes in five Australian states (New South Wales, Queensland, South Australia, Tasmania, and Victoria) for the period from June 8, 2008 to July 3, 2016. As for the estimation results, we find evidence that the three hidden regimes correspond to a low- price regime, a high-price regime, and a spike regime. With the exception of Tasmania, the sojourn time in the spike regime is typically very short, no more than two weeks in the nonparametric setting and less than three weeks in the parametric setting. Victoria has higher transition probabilities to the spike regime. Running the decoding algorithm, the analysis systemically finds the timing of the three regimes, and thus, we link the empirical results to the policy changes in the Australian electricity market. The persistence of high-price regime during 2012 and 2014 coincides with the environmental policy reforms adopted by the Australian States. There are higher transition probabilities to the spike regime in Victoria, and Tasmania has different characteristics in terms of hidden regimes. The limitation of this study is that the policy discussion is based on our observations and a more formal analysis (e.g. causality test) is needed to establish such an association/relationship. Future work can focus on employing formal econometric methods to study the causal relationship between the policy changes and the transition of different hidden regimes.

Acknowledgements

The research of the corresponding author was supported by the Economic and Social Research Council (UK) [grant number ES/J50001X/1] and the Royal Economics Society Junior Fellowship.

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44 Highlights:

 We model the Australian electricity prices by a three-regime HSMM

 Price spikes can be modelled as one special regime with very short sojourn time  The other two regimes correspond to a low-price regime and a high-price regime  We link the empirical results to the policy changes in the Australian NEM