The RES-induced Switching Effect Across Fossil Fuels: An Analysis of the Italian Day-Ahead and Balancing Prices and Their Connected Costs
Angelica Gianfreda (),
Lucia Parisio () and
Matteo Pelagatti ()
No 360, Working Papers from University of Milano-Bicocca, Department of Economics
The massive introduction of RES in electricity markets has influenced the long-run dynamics of electricity prices and their interactions with conventional thermal production sources. Taking into account the Northern Italian zone characterized by a high solar PV and hydro penetration, we firstly provide empirical evidence on the fuels-electricity nexus across two samples characterized by low (2006-08) and high (2013-15) RES levels, both in the dayahead and balancing markets. Then, we estimate the costs for balancing power disentangling for technologies and comparing their dynamics across specific hours in both samples. We show that the fuels-electricity nexus has changed significantly in the day-ahead sessions and selectively in the balancing sessions. We also find evidence of high balancing prices that we interpret as a signal of strategic use of real time sessions by conventional producers. Our findings suggest policy makers to carefully monitor all trading sessions, especially those close to real time, to avoid the exercise of market power by few operators allowed to guarantee system security and to promptly adopt a capacity market.
Keywords: Electricity; Natural Gas; Coal; Oil; Cointegration; Balancing Costs (search for similar items in EconPapers)
Date: 2017-02-03, Revised 2017-02-03
New Economics Papers: this item is included in nep-ene and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:360
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