Renewable Generation and Network Congestion: An Empirical Analysis of the Italian Power Market

Faddy Ardian, Silvia Concettini and Anna Creti
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Faddy Ardian: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Anna Creti: Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article empirically investigates the impact of renewable production on congestion using a unique database on the Italian Power Market, where zonal pricing is implemented. We estimate two econometric models: a multinomial logit model, to assess whether renewables increase the occurrence of congestion, and a two stage least squares (2SLS) model to evaluate the impact of wind and photovoltaics on congestion costs. Our analysis suggests that larger renewable supply in importing regions decreases the probability of congestion compared to the no congestion case, while the reverse occurs when renewable production is located in an exporting region. The 2SLS estimations reveal that the same mechanisms explain the level of congestion costs. Our results also highlight that the magnitude of the congestion effects, both in terms of probability and costs, is very sensitive to the location of the historical efficient production, mainly hydro power, and to the geographical configuration of the transmission network.

Keywords: RES generation; Zonal pricing; Congestion; Day-ahead market (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

Published in Energy Journal, 2018, 39 (Special issue 2), ⟨10.5547/01956574.39.SI2.fard⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02315332

DOI: 10.5547/01956574.39.SI2.fard

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