Reaching New Lows? The Pandemic's Consequences for Electricity Markets

35 Pages Posted: 15 Jun 2020

Date Written: June 10, 2020

Abstract

The large reductions in electricity demand caused by the COVID-19 crisis have disrupted electricity systems worldwide. This article draws insights from New York into the consequences of the pandemic for electricity markets. It disentangles the effects of the demand reductions, increased forecast errors, and fuel price drops on the day-ahead and real-time markets. From March 16 to May 31, New York has experienced a 6.5% demand reduction, prices have dropped, and producers have lost $87 million (-18%). This estimate extrapolates to $2.6 billion for the entire US. Looking forward, these new lows signal the needs for market design adjustments.

Keywords: COVID-19, Demand, Energy, Electricity Markets

JEL Classification: L94, Q02, Q41, Q47

Suggested Citation

Benatia, David, Reaching New Lows? The Pandemic's Consequences for Electricity Markets (June 10, 2020). USAEE Working Paper No. 20-454, Available at SSRN: https://ssrn.com/abstract=3623966 or http://dx.doi.org/10.2139/ssrn.3623966

David Benatia (Contact Author)

CREST - ENSAE ( email )

France

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