Demand Shocks and Price Contagion in Electricity Markets
SeriesResearch Master Defense
Date and time
August 30, 2021
11:00 - 12:00
As households start producing electricity using renewable energy, electricity markets are left vulnerable to local demand shocks. In this paper I develop a network-agent based model of local and cross-border electricity markets to investigate the effects of local shocks on electricity prices and blackouts. I show how demand shocks in networks with highly concentrated bargaining power lead to sustained price imbalances between local markets. Consistent with previous findings, in this framework price caps lead to electricity shortages and blackouts. However, contrary to previous findings, I show that material integration between local markets shields consumers from price volatility only if it leads to reduced bargaining power.