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Blackouts: The role of India's Wholesale Electricity Market

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Listed:
  • Akshaya Jha
  • Louis Preonas
  • Fiona Burlig

Abstract

Blackouts impose substantial costs on electricity consumers in developing countries. We advance a new explanation for their continued prevalence in India, the world’s third-largest power sector: unlike in the developed world, utilities’ wholesale electricity demand is downward-sloping. We construct a novel dataset on power plant operations and demand. Instrumenting for cost with plausibly exogenous power plant equipment outages, we estimate a wholesale demand elasticity of –0.43. As a result, any increase in procurement costs will reduce the amount of electricity retail customers receive. Wholesale market simulations suggest that lowering procurement costs could eliminate blackouts for millions of Indian households.

Suggested Citation

  • Akshaya Jha & Louis Preonas & Fiona Burlig, 2021. "Blackouts: The role of India's Wholesale Electricity Market," NBER Working Papers 29610, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29610
    Note: DEV EEE IO
    as

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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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