Conference Agenda

Data centers may cause electricity prices to increase, which threatens energy affordability and the goals of the clean energy transition. Despite recent growth in both, causal evidence linking them is scarce. This work provides the first causal estimates of data center effects on local residential electricity prices. We use proprietary data on data center locations combined with public price data for nearly all U.S. counties from 2018-2024. We employ a novel shift-share instrumental variable design exploiting the post-2022 AI shock and spatial variation in pre-existing broadband infrastructure to identify exogenous variation in data center presence. Our baseline specification finds that an additional data center significantly decreases same-year electricity prices. This is consistent with utilities spreading fixed costs over larger customer bases. However, we find evidence of positive lagged effects, suggesting prices increase 1-2 years after operation. Results also indicate nonlinear effects. Small numbers of data centers decrease prices while many increase them. The price effect also depends on energy mix. States that have higher renewable generation experience near-term price increases from data centers, potentially due to intermittent sources' limited ability to meet demand spikes. Our results provide initial causal evidence while highlighting open questions about long-term market dynamics and the role of energy composition.

This study provides the first empirical estimates of the relationship between wind generation and balancing costs in Great Britain. It uses a two-stage least squares approach to account for simultaneity and dynamic dependencies in electricity market data. The study finds that an additional GWh of wind generation adds £0.14/MWh in balancing costs, and that this effect is larger at higher wind penetrations. The study also finds that where generation occurs makes a difference, with onshore wind in Scotland and offshore wind in the Scottish North Sea significantly incurring higher balancing costs for each unit of generation. However, domestic interconnector operations are shown to meaningfully reduce balancing costs. The findings suggest that, on average, balancing costs diminish the price benefits from low-cost wind generation by about one quarter. Overall, the findings underscore the importance of investment in flexible grid and interconnector infrastructure and highlight the potential for locational signals in renewable energy planning and policy to reduce renewable integration costs in Great Britain.

Electricity markets operate through a sequence of forward and spot markets in which firms commit to positions under uncertainty. The rapid expansion of renewable energy, supported by government policies, has increased uncertainty about residual demand realizations and, in turn, affects firms' forward coverage. This paper studies how one-year-ahead forecast errors in residual demand affect the exercise of market power in day-ahead electricity markets. Using data from the German electricity market, we examine how unexpected changes in residual demand translate into day-ahead electricity prices. We find that positive residual demand shocks—such as those arising from overestimated renewable generation—lead to higher day-ahead prices. The evidence is consistent with reduced effective forward coverage, which weakens the disciplining role of forward markets and expands the scope for strategic pricing in the day-ahead market. These results highlight a novel empirical channel through which renewable intermittency and forecast uncertainty shape market power, with important implications for electricity market design during the energy transition.

In auction markets that are prone to market power abuse, preventive mitigation of bid prices can be applied through automated mitigation procedures (AMP). Despite their widespread application in US electricity markets, there is scarce evidence on how firms strategically react to such price-cap-and-penalty regulation. Here, we causally assess the impact of AMP on the bids of generation firms, using 2019 data from the New York and New England electricity markets (NYISO, ISO-NE). We employ a regression discontinuity design, which exploits the fact that the price cap with penalty is only activated when a structural index (e.g., congestion, pivotality) exceeds a certain cutoff. In each market, 30-40% of the analyzed bidders strategically decrease their maximum bid prices by 4-10 $/MWh to avoid the penalty. However, the overall regulatory impact is not statistically detectable, suggesting heterogeneity in firm response and lax mitigation thresholds. Using a merit-order simulation, we estimate the welfare impact of more stringent thresholds to lie between 350 and 980 thousand dollars of increased buyer surplus per mitigated hour; the related number of mitigated hours remains below 33 hours/year. Our results motivate the empirical calibration of thresholds to improve the efficiency of price-cap-and-penalty regulation.

We demonstrate econometrically that European firms’ active in renewable investments experience increases in cost of debt when the debt-to-equity ratio rises and decreases when total assets increase. Moreover, return on equity decreases in the ratio but increases in total assets. Depending on the debt-to-equity ratios, cost of equity are around 8 to 9 times higher than cost of debt. This is particularly important for the European energy transition as capital-intense technologies such as wind, solar, and batteries substitute for variable cost-intense ones. We use the econometric findings to develop a theoretical model of firm investment decisions considering endogenous cost of capital and credit constraints. We implement the developed theoretical model into a numerical optimization framework (EUREGEN ) that is intended to optimize the European energy transition by focusing on electricity and hydrogen investments. We find that European 2050 average electricity prices increase to 34 e/MWh. Compared to widely used approaches in the literature this is an substantial increase.

As countries move to mitigate against climate change, there is growing concern about the transmission of risks across climate policy and energy supply domains. This study investigates that relationship descriptively using a Copula model, applied to seven countries: the United States, Canada, the United Kingdom, France, Germany, Japan, and China. Specifically, the analysis focuses on the dynamic relationships and interdependencies of energy market returns and a temporally-resolved index of national-level climate policy uncertainty. Applying the ARMA-GARCH model, we examine the marginal distributions of energy company stock returns and climate policy uncertainty series’ in each country, finding significant effects and persistent volatility, which suggest that markets require time to process information. The best-fitting model for the relationship between energy returns and climate policy uncertainty is the time-varying Gaussian model (TVN), in which the two variables exhibit symmetric dynamic dependence with persistent correlation parameters. The dynamic Copula analysis also highlights substantial differences in the strength and direction of dependence across countries: the United States and Canada exhibit near-zero dependence, the United Kingdom and Germany show negative dependence, and France, Japan, and China demonstrate positive dependence. Furthermore, the connection between energy markets and climate policy uncertainty is amplified following extreme events. Complementing the quantitative approach, the thematic analysis of climate policy texts uncovers how different countries frame, manage, and rationalize climate-related uncertainties, and provides a deeper understanding of the institutional and strategic contexts underlying observed market behaviors. By WCERE, we will incorporate new data to investigate this transmission in greater depth. This research contributes to understanding the complex interactions between energy markets and climate policy uncertainty, offering insights for policymakers and investors navigating the evolving global energy landscape.