Future assessment of the impact of the COVID-19 pandemic on the electricity market based on a stochastic socioeconomic model

Abstract

This paper proposes a time-series stochastic socioeconomic model for analyzing the impact of the pandemic on the regulated distribution electricity market. The proposed methodology combines the optimized tariff model (socioeconomic market model) and the random walk concept (risk assessment technique) to ensure robustness/accuracy. The model enables both a past and future analysis of the impact of the pandemic, which is essential to prepare regulatory agencies beforehand and allow enough time for the development of efficient public policies. By applying it to six Brazilian concession areas, results demonstrate that consumers have been/will be heavily affected in general, mainly due to the high electricity tariffs that took place with the pandemic, overcoming the natural trend of the market. In contrast, the model demonstrates that the pandemic did not/will not significantly harm power distribution companies in general, mainly due to the loan granted by the regulator agency, named COVID-account. Socioeconomic welfare losses averaging 500 (MR$/month) are estimated for the equivalent concession area, i.e., the sum of the six analyzed concession areas. Furthermore, this paper proposes a stochastic optimization problem to mitigate the impact of the pandemic on the electricity market over time, considering the interests of consumers, power distribution companies, and the government. Results demonstrate that it is successful as the tariffs provided by the algorithm compensate for the reduction in demand while increasing the socioeconomic welfare of the market.