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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Unifying Partial and General Equilibrium Modelling for Applied Policy Analysis - Staff Working Paper (PDF - 727 Kb)
Unifying Partial and General Equilibrium Modelling for Applied Policy Analysis - Staff Working Paper (Word - 231 Kb)

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

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Integrating Partial Equilibrium and CGE Modelling Frameworks (PDF - 1266 Kb)
Integrating Partial Equilibrium and CGE Modelling Frameworks (PPTX - 2004 Kb)

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