Redistribution through Efficiency: Theory and Evidence from Three Electricity Markets

Matti Liski and Vehviläinen, Iivo

No 19818, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using micro-data on over 160 million bids to buy and sell from three major electricity markets, we study efficiency improvements resulting from technologies such as storage. Consumer benefits arise not from stabilized prices but from changes in general price levels. To unpack the findings, we develop a set of price-theory results, demonstrating that the convexity of market excess demand, derived from the bids, serves as a novel measure that strongly predicts consumer benefits across all markets. This analysis highlights that even small allocative improvements can lead to significant redistributions of surplus, ultimately benefitting consumers.

Keywords: Electricity; frictions; Technology; Storage (search for similar items in EconPapers)
JEL-codes: D61 D83 F10 Q41 Q48 (search for similar items in EconPapers)
Date: 2024-12
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