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Electricity shortages, price asymmetries, and behavioural responses in the Indian energy market

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  • Biswas, Pratik
  • Sharma, Chandan
  • Padhan, Hemachandra

Abstract

This research examines how electricity shortages and crude oil prices shape electricity prices in Indian spot market. We utilize a Nonlinear Autoregressive Distributed Lag model along with Local Projection approach to track how these effects play out in the short and long run. The empirical findings reveal that electricity prices react more strongly to negative shocks, such as supply shortages and rises in oil price, than to positive ones. Moreover, the underlying reasons for these asymmetries are explained through behavioural factors, such as price inelasticity, consumer anxiety and aggressive bidding of scarcity. Furthermore, this study highlights feedback loops in which nonlinearly increasing prices lead to electricity shortages. Finally, these findings underline the need for targeted policies to enhance market resilience and pricing stability.

Suggested Citation

  • Biswas, Pratik & Sharma, Chandan & Padhan, Hemachandra, 2026. "Electricity shortages, price asymmetries, and behavioural responses in the Indian energy market," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026455
    DOI: 10.1016/j.frl.2025.109396
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