Navigating the electric storm: assessing policy responses to Europe's energy shock
Matteo Alpino (),
Emanuela Ciapanna (),
Luca Citino () and
Gabriele Rovigatti ()
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Matteo Alpino: Bank of Italy
Emanuela Ciapanna: Bank of Italy
Luca Citino: Bank of Italy
Gabriele Rovigatti: Bank of Italy, CEPR
No 1491, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area
Abstract:
We take an off-the-shelf model of the day-ahead electricity market, adapted from Reguant (2019), and use it to study how different emergency policy interventions proposed in response to the 2021–2022 European energy crisis would feed into short-run wholesale electricity price and consumption dynamics. Calibrating the model to Italian data, our analysis predicts that an EU-wide cap on natural gas prices significantly lowers electricity prices, while consumed quantities increase only marginally. A mandated reduction in electricity demand during peak hours leads to modest price declines, while a national cap on gas prices for electricity generation triggers a sharper increase in consumption. These findings suggest that emergency interventions can mitigate the short-term impact of price shocks, though they may also lead to increases in energy consumption and market distortions.
Keywords: electricity market; wholesale prices; structural model (search for similar items in EconPapers)
JEL-codes: E10 E20 J60 K40 L50 O30 (search for similar items in EconPapers)
Date: 2025-07
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1491_25
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