Dynamic Effects of Supply and Demand on Electricity Prices during the Global Energy Crisis: Evidence from Japan

Kazuhiko Ohashi, Hsiu Wu and Yohei Yamamoto

No HIAS-E-161, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: The electricity market is characterized by kinked supply and demand curves. However, how these features affect price dynamics in response to supply and demand shocks has not been fully explored. We use high-frequency data from the Japanese wholesale electricity market to investigate the impulse responses of electricity prices before and after the global energy crisis. Our results show that the price response to demand shocks declines, whereas the response to supply shocks increases during the crisis period. These patterns are consistent with an upward shift in a kinked supply curve and an inward shift in a kinked demand curve. A complementary structural vector autoregression analysis indicates that the persistent elevation in electricity prices has been driven by supply shocks, while demand shocks have partially offset this upward pressure. Overall, the results highlight the exposure of electricity prices to international fuel market conditions and underscore the roles of demand and supply shocks in electricity price dynamics.

Keywords: Electricity prices; Wholesale electricity market; Supply and demand shocks; Energy crisis; LP-IV; SVAR (search for similar items in EconPapers)
JEL-codes: C32 C36 L94 Q41 Q43 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2026-04-18
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