How Distortion on the Electric Power Market Can Lead to Stagflation

France Križanič, Jože Mencinger, Zan Oplotnik


At the time of the possible closure of the significant Slovenian classical electricity production in the Šoštanj Thermal Power Plant and related Velenje Coal Mine, as well as the termination of the subsidies of cost-inefficient electric power production in EU member states, electricity prices in Slovenia for one third of its supply would rise to a level set to cover the cost of its production with a conventional gas-steam turbine. Calculated for the price of electricity produced in the Šoštanj Thermal Power Plant, this means an average price increase of 39 €/MWh. Higher prices of electricity would affect the performance and capacity of the Slovenian economy while bringing a reduction to real household income along with annual drops in Slovenian GDP of 0.4%, Slovenia would stand to lose around 2,700 jobs, and the consumer price level would rise by 0.4%.

Keywords: Electricity Power Market, Electricity Supply and Demand, Energy and the Economy

JEL Classifications: D40, L94, Q3, Q43


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