Imperfect Markets versus Imperfect Regulation in US Electricity Generation

Steve Cicala

American Economic Review, 2022, vol. 112, issue 2, 409-41

Abstract: This paper evaluates changes in electricity generation costs caused by the introduction of market mechanisms to determine production in the United States. I use the staggered transition to markets from 1999 to 2012 to estimate the causal impact of liberalization using a differences-in-difference design on a comprehensive hourly panel of electricity demand, generators' costs, capacities, and output. I find that markets reduce production costs by 5 percent by reallocating production: gains from trade across service areas increase by 55 percent based on a 25 percent increase in traded electricity, and costs from using uneconomical units fall 16 percent.

JEL-codes: L51 L94 L98 Q41 Q48 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (21)

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DOI: 10.1257/aer.20172034

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