The cost of uncertainty: Analysing the influence of coal price changes, the Russia-Ukraine war and geopolitical risk on risk premiums in the Indian electricity spot market

IF 13.6 2区经济学 Q1 ECONOMICS

Energy Economics Pub Date : 2024-12-14 DOI:10.1016/j.eneco.2024.108129

Jalal Siddiki, Prakash Singh

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引用次数: 0

Abstract

Using hourly data from June 1, 2020 to April 25, 2024, this paper first examines the characteristics of wholesale spot - Day Ahead Market (DAM) and Real Time Market (RTM) - prices in India. Second, we examine the impact on risk premiums (RPs) of changes in coal prices, the Russian-Ukraine war, demand conditions, economic policy uncertainty (EPU) and geopolitical risks (GPRs). We find that spot prices are highly volatile. Average hourly DAM prices are significantly higher than RTM prices for most hours during both weekdays and weekends, resulting in positive RPs and reflecting supply shortages and the presence of inefficiency in Indian wholesale electricity markets. The Russia-Ukraine war, EPU, GPRs, coal prices and high peak-hour demand increase RPs and are critical factors in explaining RPs. Results are robust across data frequencies and across sample periods. The results suggest increasing product diversification to reduce dependence on coal-based electricity production. These results have important policy implications for attempts to circumvent uncertainty, given that the Russia-Ukraine war has accelerated the rise in energy prices and brought significant uncertainty to Indian and global energy markets.

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来源期刊

Energy Economics ECONOMICS-

CiteScore

18.60

自引率

12.50%

发文量

524

期刊介绍： Energy Economics is a field journal that focuses on energy economics and energy finance. It covers various themes including the exploitation, conversion, and use of energy, markets for energy commodities and derivatives, regulation and taxation, forecasting, environment and climate, international trade, development, and monetary policy. The journal welcomes contributions that utilize diverse methods such as experiments, surveys, econometrics, decomposition, simulation models, equilibrium models, optimization models, and analytical models. It publishes a combination of papers employing different methods to explore a wide range of topics. The journal's replication policy encourages the submission of replication studies, wherein researchers reproduce and extend the key results of original studies while explaining any differences. Energy Economics is indexed and abstracted in several databases including Environmental Abstracts, Fuel and Energy Abstracts, Social Sciences Citation Index, GEOBASE, Social & Behavioral Sciences, Journal of Economic Literature, INSPEC, and more.