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Unifying Partial and General Equilibrium modelling for applied policy analysis

Staff working paper

This paper by Tim Murray and John Salerian was released on 13 December 2019.

In this paper we explain how to embed a Partial Equilibrium (PE) model of the electricity generation and transmission sector within a simplified Computable General Equilibrium (CGE) model to create a single model that is able to provide the types of insights typically only available from each model separately.

This approach has the potential to make CGE models more useful for analysis of policy where both the sectoral and economywide details are important and there are strong economic interdependencies between the two.

To demonstrate the proof of concept and the potential usefulness of this approach, we use the model to illustrate the economic principles underlying the Australian National Electricity Market (NEM) and the Renewable Energy Market by including Australia's Renewable Energy Target (RET) framework explicitly.

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John and Tim presented their paper at the Australian Conference of Economists on 13 July 2018.

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