Crises and energy markets reforms

Abstract

The spikes in energy prices observed following recent major global shocks—e.g., COVID-19 and Russia-Ukraine war —as well as issues related to the diffusion of renewable energy power generation, have reopened the debate about the design of electricity markets and the role of the “state” vs. “market” in the electricity markets governance. In this article, we contribute to this debate by looking at the effect of economic crises on energy markets regulation. We find that, historically, economic crises have been associated with a persistent tightening in energy markets regulation (i.e., more restrictions to competition), with the effect being larger during periods of high economic and policy uncertainty and when governments were politically strong—that is, characterized by a larger majority, in majoritarian systems, and at the beginning of their mandate.