Blackouts: The role of India's Wholesale Electricity Market

Akshaya Jha, Louis Preonas () and Fiona Burlig

No 29610, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Blackouts impose substantial costs on electricity consumers in developing countries. We advance a new explanation for their continued prevalence in India, the world’s third-largest power sector: unlike in the developed world, utilities’ wholesale electricity demand is downward-sloping. We construct a novel dataset on power plant operations and demand. Instrumenting for cost with plausibly exogenous power plant equipment outages, we estimate a wholesale demand elasticity of –0.43. As a result, any increase in procurement costs will reduce the amount of electricity retail customers receive. Wholesale market simulations suggest that lowering procurement costs could eliminate blackouts for millions of Indian households.

JEL-codes: L94 O13 Q41 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-ene and nep-reg
Note: DEV EEE IO
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