IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v114y2022ics0140988322003693.html
   My bibliography  Save this article

Assessing the regional redistributive effect of renewable power production through a spot market algorithm simulator: The case of Italy

Author

Listed:
  • Concettini, Silvia
  • Creti, Anna
  • Gualdi, Stanislao

Abstract

In order to study the sensitivity of market equilibria to changes in production from renewable units at different locations, we developed an algorithm that simulates the hourly equilibrium (price–quantity) of the Italian day-ahead market. Our analysis shows that, when power markets are organised on zonal basis with locational price signals and final buyers pay a unique wholesale price, a larger renewable production decreases the average zonal prices, but the distribution of benefits largely depends on power plants’ localisation. We study the impact of such expansion on network congestion occurrence, supply–demand zonal balance and zonal generation mix; we calculate the zonal substitution effects between renewable and non-renewable technologies, and within renewable technologies. We finally discuss the possible implications on national and local market power. Our paper analyses the multifaceted consequences of energy transition policies based on boosting renewable production and it highlights the importance of location in such expansion; in zonal markets, this aspect in crucial to get price decrease.

Suggested Citation

  • Concettini, Silvia & Creti, Anna & Gualdi, Stanislao, 2022. "Assessing the regional redistributive effect of renewable power production through a spot market algorithm simulator: The case of Italy," Energy Economics, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:eneeco:v:114:y:2022:i:c:s0140988322003693
    DOI: 10.1016/j.eneco.2022.106225
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988322003693
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2022.106225?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Simona Bigerna and Carlo Andrea Bollino, 2014. "Electricity Demand in Wholesale Italian Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Würzburg, Klaas & Labandeira, Xavier & Linares, Pedro, 2013. "Renewable generation and electricity prices: Taking stock and new evidence for Germany and Austria," Energy Economics, Elsevier, vol. 40(S1), pages 159-171.
    3. Anna Cretì & Fulvio Fontini, 2019. "Economics of Electricity. Markets, Competition and Rules," Post-Print hal-02304345, HAL.
    4. Forrest, Sam & MacGill, Iain, 2013. "Assessing the impact of wind generation on wholesale prices and generator dispatch in the Australian National Electricity Market," Energy Policy, Elsevier, vol. 59(C), pages 120-132.
    5. Simona Bigerna, Carlo Andrea Bollino and Paolo Polinori, 2016. "Market Power and Transmission Congestion in the Italian Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    6. Ketterer, Janina C., 2014. "The impact of wind power generation on the electricity price in Germany," Energy Economics, Elsevier, vol. 44(C), pages 270-280.
    7. Gelabert, Liliana & Labandeira, Xavier & Linares, Pedro, 2011. "An ex-post analysis of the effect of renewables and cogeneration on Spanish electricity prices," Energy Economics, Elsevier, vol. 33(S1), pages 59-65.
    8. Faddy Ardian & Silvia Concettini & Anna Creti, 2018. "Renewable Generation and Network Congestion: An Empirical Analysis of the Italian Power Market," Post-Print hal-02315332, HAL.
    9. Simona Bigerna, Carlo Andrea Bollino and Paolo Polinori, 2016. "Renewable Energy and Market Power in the Italian Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Bollino-M).
    10. Miguel Castro, 2019. "Is a Wetter Grid a Greener Grid? Estimating Emissions Offsets for Wind and Solar Power in the Presence of Large Hydroelectric Capacity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    11. Figueiredo, Nuno Carvalho & Silva, Patrícia Pereira da & Cerqueira, Pedro A., 2015. "Evaluating the market splitting determinants: evidence from the Iberian spot electricity prices," Energy Policy, Elsevier, vol. 85(C), pages 218-234.
    12. Harrison Fell & Daniel T. Kaffine, 2018. "The Fall of Coal: Joint Impacts of Fuel Prices and Renewables on Generation and Emissions," American Economic Journal: Economic Policy, American Economic Association, vol. 10(2), pages 90-116, May.
    13. James Bushnell & Kevin Novan, 2018. "Setting with the Sun: The Impacts of Renewable Energy on Wholesale Power Markets," NBER Working Papers 24980, National Bureau of Economic Research, Inc.
    14. Clò, Stefano & Cataldi, Alessandra & Zoppoli, Pietro, 2015. "The merit-order effect in the Italian power market: The impact of solar and wind generation on national wholesale electricity prices," Energy Policy, Elsevier, vol. 77(C), pages 79-88.
    15. Sensfuß, Frank & Ragwitz, Mario & Genoese, Massimo, 2008. "The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany," Energy Policy, Elsevier, vol. 36(8), pages 3076-3084, August.
    16. Harrison Fell & Daniel T. Kaffine & Kevin Novan, 2021. "Emissions, Transmission, and the Environmental Value of Renewable Energy," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 241-272, May.
    17. Cludius, Johanna & Forrest, Sam & MacGill, Iain, 2014. "Distributional effects of the Australian Renewable Energy Target (RET) through wholesale and retail electricity price impacts," Energy Policy, Elsevier, vol. 71(C), pages 40-51.
    18. O'Mahoney, Amy & Denny, Eleanor, 2011. "The Merit Order Effect of Wind Generation on the Irish Electricity Market," MPRA Paper 56043, University Library of Munich, Germany.
    19. Csereklyei, Zsuzsanna & Qu, Songze & Ancev, Tihomir, 2019. "The effect of wind and solar power generation on wholesale electricity prices in Australia," Energy Policy, Elsevier, vol. 131(C), pages 358-369.
    20. Daniel T. Kaffine, Brannin J. McBee, and Jozef Lieskovsky, 2013. "Emissions Savings from Wind Power Generation in Texas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    21. Woo, C.K. & Zarnikau, J. & Moore, J. & Horowitz, I., 2011. "Wind generation and zonal-market price divergence: Evidence from Texas," Energy Policy, Elsevier, vol. 39(7), pages 3928-3938, July.
    22. Kevin Novan, 2015. "Valuing the Wind: Renewable Energy Policies and Air Pollution Avoided," American Economic Journal: Economic Policy, American Economic Association, vol. 7(3), pages 291-326, August.
    23. Thao Pham, 2019. "Market Power Issues in Liberalized Wholesale Electricity Markets: A Review of the Literature with a Look into the Future," Revue d'économie politique, Dalloz, vol. 129(3), pages 325-354.
    24. Woo, C.K. & Horowitz, I. & Moore, J. & Pacheco, A., 2011. "The impact of wind generation on the electricity spot-market price level and variance: The Texas experience," Energy Policy, Elsevier, vol. 39(7), pages 3939-3944, July.
    25. Cutler, Nicholas J. & Boerema, Nicholas D. & MacGill, Iain F. & Outhred, Hugh R., 2011. "High penetration wind generation impacts on spot prices in the Australian national electricity market," Energy Policy, Elsevier, vol. 39(10), pages 5939-5949, October.
    26. Woo, C.K. & Moore, J. & Schneiderman, B. & Ho, T. & Olson, A. & Alagappan, L. & Chawla, K. & Toyama, N. & Zarnikau, J., 2016. "Merit-order effects of renewable energy and price divergence in California’s day-ahead and real-time electricity markets," Energy Policy, Elsevier, vol. 92(C), pages 299-312.
    27. Joseph Cullen, 2013. "Measuring the Environmental Benefits of Wind-Generated Electricity," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 107-133, November.
    28. Thao Pham, 2019. "Market Power Issues in Liberalized Wholesale Electricity Markets: A Review of the Literature with a Look into the Future," Post-Print hal-02568252, HAL.
    29. Simona Bigerna and Carlo Andrea Bollino, 2015. "A System Of Hourly Demand in the Italian Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Csereklyei, Zsuzsanna & Qu, Songze & Ancev, Tihomir, 2019. "The effect of wind and solar power generation on wholesale electricity prices in Australia," Energy Policy, Elsevier, vol. 131(C), pages 358-369.
    2. Bell, William Paul & Wild, Phillip & Foster, John & Hewson, Michael, 2017. "Revitalising the wind power induced merit order effect to reduce wholesale and retail electricity prices in Australia," Energy Economics, Elsevier, vol. 67(C), pages 224-241.
    3. Daron Acemoglu, Ali Kakhbod, and Asuman Ozdaglar, 2017. "Competition in Electricity Markets with Renewable Energy Sources," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    4. Graf, Christoph & Marcantonini, Claudio, 2017. "Renewable energy and its impact on thermal generation," Energy Economics, Elsevier, vol. 66(C), pages 421-430.
    5. Gürtler, Marc & Paulsen, Thomas, 2018. "The effect of wind and solar power forecasts on day-ahead and intraday electricity prices in Germany," Energy Economics, Elsevier, vol. 75(C), pages 150-162.
    6. Ricardo Gonçalves & Flávio Menezes, 2022. "Market‐wide impact of renewables on electricity prices in Australia," The Economic Record, The Economic Society of Australia, vol. 98(320), pages 1-21, March.
    7. Woo, C.K. & Chen, Y. & Olson, A. & Moore, J. & Schlag, N. & Ong, A. & Ho, T., 2017. "Electricity price behavior and carbon trading: New evidence from California," Applied Energy, Elsevier, vol. 204(C), pages 531-543.
    8. Pradhan, Ashis Kumar & Rout, Sandhyarani & Khan, Imran Ahmed, 2021. "Does market concentration affect wholesale electricity prices? An analysis of the Indian electricity sector in the COVID-19 pandemic context," Utilities Policy, Elsevier, vol. 73(C).
    9. Nibedita, Barsha & Irfan, Mohd, 2022. "Analyzing the asymmetric impacts of renewables on wholesale electricity price: Empirical evidence from the Indian electricity market," Renewable Energy, Elsevier, vol. 194(C), pages 538-551.
    10. John J. García Rendón & Alex F. Pérez-Libreros, 2019. "El precio spot de la electricidad y la inclusión de energía renovable no convencional: evidencia para Colombia," Documentos de Trabajo CIEF 17393, Universidad EAFIT.
    11. Gonçalves, Ricardo & Menezes, Flávio, 2022. "The price impacts of the exit of the Hazelwood coal power plant," Energy Economics, Elsevier, vol. 116(C).
    12. Perez, Alex & Garcia-Rendon, John J., 2021. "Integration of non-conventional renewable energy and spot price of electricity: A counterfactual analysis for Colombia," Renewable Energy, Elsevier, vol. 167(C), pages 146-161.
    13. Olukunle O. Owolabi & Toryn L. J. Schafer & Georgia E. Smits & Sanhita Sengupta & Sean E. Ryan & Lan Wang & David S. Matteson & Mila Getmansky Sherman & Deborah A. Sunter, 2021. "Role of Variable Renewable Energy Penetration on Electricity Price and its Volatility Across Independent System Operators in the United States," Papers 2112.11338, arXiv.org, revised Nov 2022.
    14. Mwampashi, Muthe Mathias & Nikitopoulos, Christina Sklibosios & Konstandatos, Otto & Rai, Alan, 2021. "Wind generation and the dynamics of electricity prices in Australia," Energy Economics, Elsevier, vol. 103(C).
    15. Beltrami, Filippo & Fontini, Fulvio & Grossi, Luigi, 2021. "The value of carbon emission reduction induced by Renewable Energy Sources in the Italian power market," Ecological Economics, Elsevier, vol. 189(C).
    16. Bahramian, Pejman & Jenkins, Glenn P. & Milne, Frank, 2021. "The displacement impacts of wind power electricity generation: Costly lessons from Ontario," Energy Policy, Elsevier, vol. 152(C).
    17. Macedo, Daniela Pereira & Marques, António Cardoso & Damette, Olivier, 2020. "The impact of the integration of renewable energy sources in the electricity price formation: is the Merit-Order Effect occurring in Portugal?," Utilities Policy, Elsevier, vol. 66(C).
    18. Zarnikau, J. & Tsai, C.H. & Woo, C.K., 2020. "Determinants of the wholesale prices of energy and ancillary services in the U.S. Midcontinent electricity market," Energy, Elsevier, vol. 195(C).
    19. Abban, Abdul Rashid & Hasan, Mohammad Z., 2021. "Solar energy penetration and volatility transmission to electricity markets—An Australian perspective," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 434-449.
    20. Hakan Acaroğlu & Fausto Pedro García Márquez, 2021. "Comprehensive Review on Electricity Market Price and Load Forecasting Based on Wind Energy," Energies, MDPI, vol. 14(22), pages 1-23, November.

    More about this item

    Keywords

    Electricity market; Renewable sources; Zonal merit order effect; Substitution effect; Congestion;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:114:y:2022:i:c:s0140988322003693. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.