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

Silvia Concettini, Anna Creti and Stanislao Gualdi

Energy Economics, 2022, vol. 114, issue C

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.

Keywords: Electricity market; Renewable sources; Zonal merit order effect; Substitution effect; Congestion (search for similar items in EconPapers)
JEL-codes: C63 L94 Q41 Q42 Q48 Q58 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:114:y:2022:i:c:s0140988322003693

DOI: 10.1016/j.eneco.2022.106225

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