Association Webinars: Exercise of market power during Covid-19 Pandemic lockdown



A remarkable decrease of demand occurred in Italy in the emergency period during the Covid-19 pandemic. In the period 10 March – 2 June 2020, we had negative peaks of hurly demand over 50% and record low prices about 20 Euro/MWh.

The annual report of an important electric company shows proudly for 2020, a decrease in net generation of 10%, a decrease in costs of 22.5%, a decrease of revenues of 19.1%, an increase in profit of 9%.

It is enough to hint that the microeconomic theory really works! When decreasing returns to scale prevail, then an output decline brings about a more than proportionate decrease in costs. But what about profits?

We investigate the exercise of market power in the Italian Power Exchange during the Covid-19 pandemic crisis, explicitly considering transmission line congestion, disentangling the measure of the unilateral market power from the congestion rent and re-dispatching costs, with the model that we first proposed in an article in the Energy Journal.

We use elementary hourly bid data and compute the Zonal Lerner Index for every hour during the period January – June 2020 for the main operators both on the supply and the demand side.

Overall, the main players have somehow increased the intensity of the exercise of market power during the Covid-19 pandemic crisis, which calls for more pro-competitive action by the Regulatory Authority also paying more attention to heterogeneous players’ behaviors.

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Maria Chiara D'Errico is a Research Fellow at the University of Perugia
Doctoral Degree un Agro-Industrial Economics. Research interests in: Applied economics, Energy Economics, Bayesian Statistics.

Carlo Andrea Bollino is a Professor of Economics and Energy Economics at the University of Perugia
PH D in Economics, University of Pennsylvania, Research interests in: Microeconomics, Energy Economics, Market regulation

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Event Date: December 7, 2021

Event Time: 10:00 - 11:00 AM Eastern Time

Topic: Exercise of market power during Covid-19 Pandemic lockdown

Speakers: Maria Chiara D'Errico and Carlo Andrea Bollino

Price: FREE

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