Spikes in Power Prices: Unravelling Grid Congestion

Majah-Leah Ravago, Michael Abrigo, Patrizia Benedicto, Nastasha Brigitte Kuan, J. Kathleen Magadia, Charlotte Marjorie Relos and James Roumasset
Additional contact information
Patrizia Benedicto: ACERD
Nastasha Brigitte Kuan: ACERD
J. Kathleen Magadia: ACERD
Charlotte Marjorie Relos: ACERD

No 202401, Department of Economics, Ateneo de Manila University, Working Paper Series from Department of Economics, Ateneo de Manila University

Abstract: How do congestion and disruptions in transmission impact electricity prices? We investigate the impact of congestion on the wholesale spot market prices and the impact of disruption on residential electricity prices. We utilize time-series transmission node-level data on congestion market prices and combine it with other information on the market network data from the independent electricity market operator for our congestion analysis. Treating congestion as an aberration in the system, we apply impulse response analysis to examine the dynamic and cumulative impact of congestion on wholesale electricity spot prices. To examine the impact of disruption on prices, we use distribution unit data submitted to the industry regulator of the Philippines. We exploit an incident in the Visayas that cuts transmission capacity in half causing a disruption in the system as a natural experiment. We employ a synthetic difference-in-differences methodology and examine the effect of this disruption on consumer electricity prices and market concentration. We find that congestions greatly impact market nodal prices, and the effect persists beyond the time of congestion. The impact of the disruption varies by region at the distribution level, possibly explained by the region’s resources and endowment.

Keywords: Congestion; transmission; electricity prices; Philippines; impulse response function; difference-in-difference (search for similar items in EconPapers)
JEL-codes: C13 C99 L14 L94 Q40 Q41 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2024-03
New Economics Papers: this item is included in nep-com, nep-ene, nep-reg and nep-sea
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