Zero Energy Day: How Nationwide Blackouts Affect the Economy

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. We combine electricity market data with high-frequency economic transaction data from Chile to examine the effects of nationwide blackouts. Economic activity declined by 35 percent on the blackout day, but half of this loss was shifted to subsequent days, highlighting the importance of accounting for intertemporal substitution. Exploiting spatial variation in blackout severity, we highlight the importance of accounting for endogenous recovery when estimating the marginal value of lost load.