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Zero Energy Day: How Nationwide Blackouts Affect the Economy

Author

Listed:
  • Luis E. Gonzales

    (Central Bank of Chile)

  • Koichiro Ito

    (University of Chicago and NBER)

  • Mar Reguant

    (IAE-CSIC, Northwestern, CEPR, and NBER)

Abstract

Electricity reliability is a central challenge for the energy transition, as growing energy demand, renewable energy integration, and natural disasters increase the risk of large-scale blackouts. However, the economic impacts of large-scale blackouts remain largely unknown. Combining electricity market data with high-frequency economic transaction data from Chile, we find that economic activity declined by 35 percent on the nationwide blackout day, but half of this loss was recovered on subsequent days, highlighting the importance of intertemporal substitution. Exploiting spatial variation in blackout severity, we show that accounting for endogenous recovery is critical when estimating the marginal value of lost load.

Suggested Citation

  • Luis E. Gonzales & Koichiro Ito & Mar Reguant, 2026. "Zero Energy Day: How Nationwide Blackouts Affect the Economy," Working Papers 2026-53, Becker Friedman Institute for Research In Economics.
    • Handle: RePEc:bfi:wpaper:2026-53
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    File URL: https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_2026-53.pdf
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