Reaching new lows? The pandemic's consequences for electricity markets

Abstract

The COVID-19 crisis has disrupted electricity systems worldwide. This article disentangles the effects of the demand reductions, fuel price drops, and increased forecast errors on New York’s day-ahead and real-time markets by combining machine learning and structural econometrics. From March 2020 to February 2021, statewide demand has decreased by 4.6 TWh (-3%) including 4 TWh (-8%) for New York City alone, and the day-ahead market has depreciated by $250 million (-6%). The realtime market has, however, appreciated by $15 million (+23%) because of abnormally large forecast errors which significantly undermined system efficiency.