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
利用2020年6月至2024年4月的每小时数据，研究了印度日前和实时电力现货市场的价格特征，发现煤炭价格、俄乌战争、经济政策不确定性和地缘政治风险显著推高了风险溢价，反映了市场效率低下和供应短缺。
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 Russia-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. • In Indian electricity spot markets, DAM prices are usually higher than RTM prices, generating positive risk premiums (RPs). • Positive RPs confirm the presence of excess demand in Indian electricity markets. • Volatility in DAM and RTM prices, GPRs and EPU raises RPs in spot markets. • The Russia-Ukraine war and the subsequent rises in coal prices have increased RPs. • Inefficiency with a lack of competition prevails in Indian electricity markets.