Impact of Wind and Solar Generation on the Italian Zonal Electricity Price

Mahmood Hosseini Imani, Ettore Bompard, Pietro Colella and Tao Huang
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Mahmood Hosseini Imani: Department of Energy, Politecnico di Torino, 10129 Torino, Italy
Ettore Bompard: Department of Energy, Politecnico di Torino, 10129 Torino, Italy
Pietro Colella: Department of Energy, Politecnico di Torino, 10129 Torino, Italy
Tao Huang: Department of Energy, Politecnico di Torino, 10129 Torino, Italy

Energies, 2021, vol. 14, issue 18, 1-26

Abstract: This paper assesses the impact of increasing wind and solar power generation on zonal market prices in the Italian electricity market from 2015 to 2019, employing a multivariate regression model. A significant aspect to be considered is how the additional wind and solar generation brings changes in the inter-zonal export and import flows. We constructed a zonal dataset consisting of electricity price, demand, wind and solar generation, net input flow, and gas price. In the first and second steps of this study, the impact of additional wind and solar generation that is distributed across zonal borders is calculated separately based on an empirical approach. Then, the Merit Order Effect of the intermittent renewable energy sources is quantified in every six geographical zones of the Italian day-ahead market. The results generated by the multivariate regression model reveal that increasing wind and solar generation decreases the daily zonal electricity price. Therefore, the Merit Order Effect in each zonal market is confirmed. These findings also suggest that the Italian electricity market operator can reduce the National Single Price by accelerating wind and solar generation development. Moreover, these results allow to generate knowledge advantageous for decision-makers and market planners to predict the future market structure.

Keywords: inter-zonal exchange; Italian wholesale power market; Merit Order Effect; multivariate regression; solar power integration; wind power integration (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
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