Zero Energy Day: How Nationwide Blackouts Affect the Economy

Luis E. Gonzales (), Koichiro Ito () and Mar Reguant ()
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Luis E. Gonzales: Central Bank of Chile
Koichiro Ito: University of Chicago and NBER
Mar Reguant: IAE-CSIC, Northwestern, CEPR, and NBER

No 2026-53, Working Papers from Becker Friedman Institute for Research In Economics

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.

Pages: 34 pages
Date: 2026
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