Market failure or politics? Understanding the motives behind regulatory actions to address surging electricity prices

Selahattin Murat Sirin, Ercument Camadan, Ibrahim Etem Erten and Alex Hongliang Zhang

Energy Policy, 2023, vol. 180, issue C

Abstract: This paper aims to explore the underlying motivations that drive regulatory measures to address surging electricity prices. We discuss this question with a systematic review of the literature on price spikes in electricity markets and compare the recommended measures in the literature with political and regulatory actions taken during the 2021–22 European energy crisis. Our review shows a discrepancy between the arguments presented in the literature and the regulatory narrative in practice. Although theoretical arguments assume a general regulatory framework driven primarily by market efficiency, recent regulatory decisions show that political concerns can shape regulatory measures to a great extent, and the political economy of regulation should be incorporated into market analyses.

Keywords: Electricity market; Price spikes; Regulation (search for similar items in EconPapers)
JEL-codes: L51 L94 Q40 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:180:y:2023:i:c:s030142152300232x

DOI: 10.1016/j.enpol.2023.113647

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