Normally if nothing else changed you'd expect prices to go down since the most expensive providers (= those with highest costs of doing their business) pulling the price up leave the market.
It’s unclear to me if that accounts for second order effects? For example, lower demand leads to lower prices, sure. But then those lower prices lead to higher demand. This should quickly reach equilibrium if buying and selling were spur of the moment decisions with no long term consequence. But in the energy market that’s not the case. Building a power plant is a commitment to buying that product, which locks in that demand regardless of price. And so continued low prices could lead to more construction of gas plants, which leads to an increase in demand.
Basically what I’m saying is that the demand curve models a simple market with a fungible good, which can be bought and sold easily. We have to recognise that it’s like studying spherical, frictionless projectiles in physics. A good starting point, but not how the real world works.
>For example, lower demand leads to lower prices, sure. But then those lower prices lead to higher demand.
Supply curve is missing in these statements.
> Building a power plant is a commitment to buying that product, which locks in that demand regardless of price.
What? Is there some sort of law that requires buyers to buy all of the electricity a power plant can produces?
> And so continued low prices could lead to more construction of gas plants, which leads to an increase in demand.
This is backwards. An increase in demand for electricity might lead to construction of new gas plants, with a bet that even with the increased supply, electricity buyers are willing to pay at least x price for electricity for y duration sufficient to earn a z return on investment for building the new gas plant.
If there is less consumption I would imagine the price would rather go up.