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High wind Penetration in an Agent-Based Model of the Electricity Market. The Case of Italy


  • Eric Guerci
  • Alessandro Sapio


In this paper, we build a realistic large-scale agent-based model of the Italian electricity market and run simulations to investigate how a significant increase in wind capacity can affect electricity prices at the national level when the wind resource is geographically concentrated, as in the case of Italy. The simulator implements both cost-based and oligopoly models in which electricity companies learn to bid strategically. We compare a scenario based on the 2010 wind supply and a scenario based on the maximum potential wind capacity as estimated in technical reports. Results confirm the beneficial effect of low-cost renewable energy in reducing average market prices, but simulated power flows in the grid suggest that congestion in the electricity network induced by high wind penetration creates market power opportunities that can offset the price reduction effects.

Suggested Citation

  • Eric Guerci & Alessandro Sapio, 2012. "High wind Penetration in an Agent-Based Model of the Electricity Market. The Case of Italy," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 415-447.
  • Handle: RePEc:cai:reofsp:reof_124_0415

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    References listed on IDEAS

    1. Alan Kirman, 1993. "Ants, Rationality, and Recruitment," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 137-156.
    2. Sylvain Barde, 2012. "Back to the future: economic rationality and maximum entropy prediction," Studies in Economics 1202, School of Economics, University of Kent.
    3. Foley Duncan K., 1994. "A Statistical Equilibrium Theory of Markets," Journal of Economic Theory, Elsevier, vol. 62(2), pages 321-345, April.
    4. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-493, May.
    5. Alfarano, Simone & Milakovic, Mishael, 2009. "Network structure and N-dependence in agent-based herding models," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 78-92, January.
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    Cited by:

    1. Balint, T. & Lamperti, F. & Mandel, A. & Napoletano, M. & Roventini, A. & Sapio, A., 2017. "Complexity and the Economics of Climate Change: A Survey and a Look Forward," Ecological Economics, Elsevier, vol. 138(C), pages 252-265.
    2. Jean-Luc Gaffard & Mauro Napoletano, 2012. "Introduction. Improving the Toolbox," Post-Print hal-01053562, HAL.
    3. Jean-Luc Gaffard & Mauro Napoletano, 2012. "Introduction. Improving the Toolbox: New Advances in Agent-Based and Computational Models," Sciences Po publications info:hdl:2441/53r60a8s3ku, Sciences Po.


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