Abstract
The electricity sector is an important part of any country's economy as it holds a cross-sectoral importance and produces a socially significant product for residents and industries. Economically, the sector is less vulnerable during world crises, receiving many variations of the state support. Both world electricity consumption and electricity generation have grown steadily over 2007-2019, with China, USA, India, Russia, Japan, Canada, South Korea, Germany, Brazil and France being world market leaders. This article analyzes the current state and the main trends of the development of the electricity industry as a whole and the financial stability of its companies. The United States and Russia, with similar functioning market models, were chosen to assess. The analysis of the financial stability of PJSC Inter RAO and Exelon Corp, two electricity giants in Russia and in the United States, has shown that they demonstrate stable results: Exelon Corp is more profitable while PJSC Inter RAO is less dependent on financing from creditors. Overall, electricity companies and the industry as a whole should not suffer much from the COVID-19 pandemic: many financial support measures have been developed in both countries, helping the sector to recover to 2019 levels by 2021.Keywords: energy sector, electricity industry, economic and financial crisis, coronavirus pandemic (COVID-19), low-carbon economy, financial stability.JEL Classifications: G30, L94, Q43, Q48DOI: https://doi.org/10.32479/ijeep.11575
Highlights
The electricity market in the past 50 years has gone through significant changes: starting off as a completely regulated market with vertically integrated state-controlled electricity companies, for many countries it has transformed into one with many competitive aspects
In 2007-2019, the compound annual growth rate (CAGR) of the world electricity consumption was higher than the CAGR of the world electricity generation by +0.4%: the CAGR of the world electricity consumption amounted to +2.8%, of the world electricity production – to +2.4% (Figure 1)
Positive trends were only observed in pre-COVID-19 February, when the electricity generation and consumption grew by 0.5% and 1.4%, (Figures 14 and 15)
Summary
The electricity market in the past 50 years has gone through significant changes: starting off as a completely regulated market with vertically integrated state-controlled electricity companies, for many countries it has transformed into one with many competitive aspects. In Russia, similar to the United States, the electricity market updated its legislative framework, which led to new regulative relationships and companies being divided into activity-specific businesses (Palamarchuk, 2016) This led to a significant increase in industry investments, resulting in positive economic outcomes for both countries. Previous research has shown that the electricity market – in terms of electricity consumption – has a positive effect on economic growth (Bass, 2018; Vasiliev, 2018) This fact highlights the importance for the state to support this market as one that is. Decreases in energy output was mainly due to a decrease in investment in fixed assets, decline in economic activity of industrial production as a whole (Savchina et al, 2017) These factors can be present for the year of 2020, as many power plants completely stopped working due to businesses shutting down. The decrease of demand in industrial sectors has resulted in an inter-fuel struggle for leadership, where nonrenewable sources are inferior to renewables (Gimadi, 2020)
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