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Assessment of the impact of supply and demand shocks on sustained price increases: Evidence from the wholesale electricity market in Portugal
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DOI：10.1080/15567249.2026.2652403.png)
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Abstract
En 中文
This study examines the persistent effects of external shocks on electricity markets, particularly in response to major global crises such as the COVID-19 pandemic and the Russia-Ukraine war. The Portuguese market's structural dependence on fossil fuels and imports makes it vulnerable to supply chain instability. By analyzing hourly data from January 2015 to September 2024 using a Structural Vector Autoregression (SVAR) with Blanchard-Quah long-run restrictions and Fry-Pagan F-Triangular identification, this study isolates the distinct short- and long-run effects of supply- and demand-side shocks-particularly those associated with the COVID-19 pandemic and the Russia-Ukraine war. Our results provide robust empirical evidence that sustained electricity price increases during 2021-2024 were predominantly driven by supply-side shocks (e.g., natural gas shortages, infrastructure bottlenecks, and intermittent renewable underperformance), which exerted long-lasting upward pressure on prices. In contrast, demand-side shocks-such as those from pandemic lockdowns-induce only temporary deviations, with limited persistence in price levels. The slow adjustment of electricity prices (0.24% per hour) relative to the rapid corrections in generation (34.4% per hour) and demand (14.5% per hour) further underscores the structural inflexibility on the supply side and the dominance of supply constraints in shaping price dynamics.
Keywords:
Electricity price
SVAR model
price dynamics
vector error correction model (VECM)
supply-side shocks
global crisis
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