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The massive introduction of RES in electricity markets is recognized to have induced a merit order effect on wholesale prices. While day-ahead prices are likely to decline as RES-E production increases, the effects on balancing market sessions are more ambiguous. Taking into account the Northern Italian zone characterized by a high solar PV and hydro penetration, we provide empirical evidence that balancing quantities decreased while costs increased between two samples associated with low (2006–08) and high (2013–15) RES levels. We estimate balancing costs for different technologies and compare their dynamics across specific hours. We find evidence of increasing balancing prices in particular market conditions, that we interpret as a signal of strategic use of real time sessions by conventional producers prone to the merit order effect in the day-ahead market. We compare our results to those obtained in the German market (where, on the contrary, balancing costs have decreased) and postulate that the different market designs may explain these results. Our findings suggest that the Italian policy makers should 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, additionally, to promptly adopt a capacity market. [ABSTRACT FROM AUTHOR]

In spite of the dramatic changes that affected the electricity sector in the last decade across Europe, the governance of the system has not evolved accordingly, and the centralised regulatory framework is still the norm. This paper focuses on the role of governance as a driver for innovation in the power sector: through the assessment of the Italian market and of significant Italian policies, it reflects on the instruments that allow the full integration of Distributed Energy Resources and the creation of distributed grid control systems across Europe. [ABSTRACT FROM AUTHOR]

In the electricity market, sudden price jumps occur more frequently than in other markets due to the peculiarity of electricity. Furthermore, the structural spot characteristics of the electricity market determine high price variability. All these characteristics have been accentuated by the dramatic increase of renewable energy supply in Italy starting in 2010. These features suggest the possibility of contagion effects across Italian regional electricity markets, considering contagion such as a sudden and significant increase in cross-market links arising from a shock to a specific market. In this paper we investigate whether such a renewable energy increase has affected the contagion behavior in the Italian electricity spot market taking into account both the difference between interdependence and contagion and the direction of the shock. We find empirical evidence, with significant tests, that no changes have occurred in interdependence mechanism, nor in contagion effects due to renewable energy sources development in Italy. [ABSTRACT FROM AUTHOR]

This analysis investigates the business case of a virtually aggregated unit with PV and Power-to-Gas, outlining the added value of enhanced operation modes for the deepened market integration of distributed energy resources in an aggregated form. Based on empirical generation and market data, the presented analysis outlines the added benefit of the so-called value stacking that considers the exploitation of short-term arbitrage opportunities, the provision of secondary and tertiary frequency reserve, and active imbalance management to balance forecast errors. A multi-stage and multi-period optimization approach is presented to generate an aggregated bidding strategy on multiple energy and ancillary service markets. On a case study basis with hourly resolution, annual energy flows and financial outcomes are derived for the modelled plant. Overall, nine different operating modes with different levels of market integration of the aggregated unit are analysed. While static baseline operation results barely profitable, proper integration into energy markets raises the annual cash flow from operating activities to around 60 k€ per aggregated MW. This six-fold increase is accompanied by a much more price-specific dispatch with the equivalent full-load hours of controllable output effectively dropping to about one-third. Integrating the aggregated unit further into balancing markets and performing active imbalance management leverages the freed-up capacity margin and further increases the operational results up to 150 k€ per MW. The provided empirical insights from the case study are beneficial for both practitioners in the energy sector that want to evaluate the potential value of virtual aggregation with enhanced operation and policymakers that consider further regulatory amendments to open markets and enable further integration of new energy sources. • Outlining the implications of enhanced operations modes for distributed energy models. • Considering value stacking of an aggregated unit with Power-to-Gas and Photovoltaics. • Focus on integration into energy and balancing market as well as imbalance management. • Multi-stage and multi-period optimization approach built on empirical data from Italy. [ABSTRACT FROM AUTHOR]

The coupling of electrical batteries with variable renewable power generation can increase the production flexibility and revenue of power plant operators. This study focuses on developing an optimisation model to manage the operational revenue of a renewable power unit comprising a wind farm, solar photovoltaic (PV) power plant, and electrical battery. The power system integration was conducted by formulating a mixed-integer linear programme to schedule the day-ahead operation of the renewable power unit in two liberalised power markets: the Italian and Iberian day-ahead power markets. Several scenarios and case studies have been analysed to assess the value of storage for revenue maximisation. The proposed methodology results reveal that the average yearly net revenue of the hybrid PV-wind-storage power plant can increase by 4% compared to the standalone operation of the wind and solar PV power plants. Additionally, the results indicate that in the markets analysed the coupling of storage to wind power generates a higher revenue than coupling storage systems with solar power. The study demonstrated a correlation between the increase in revenue and the capacity installed in the battery and concluded that the use of hybrid VRE storage systems would be feasible in the Iberian Peninsula and Italy for battery installation costs ranging from €14,804/MW to €38,267/MW. [Display omitted] • Optimisation model for economic assessment of the operation of VRE power plants coupled with storage. • Long-term revenue evaluation of the coupling of storage to VRE power plants in day-ahead markets. • Price volatility drives the value prospect of adding a battery to power plants. • The coupling of storage and VRE power plants is feasible for battery capacity costs of below €38,267/MW. [ABSTRACT FROM AUTHOR]

The Italian electricity market has been characterized by a remarkable increase of renewable energy source (RES) supply since 2010, which has determined relevant structural changes in the electric system. Noticeably, during favorable weather conditions, such as sunny or windy hours, increasing supply of RES generation exerts a downward pressure to the formation of the equilibrium price in the market and at the same time forces an increase in line congestion. The aim of this paper is to investigate whether such RES increase has affected the exercise of market power in the Italian Power Exchange (IPEX), explicitly considering transmission line congestion. We employ our approach to construct the residual demand curve and to disentangle the measure of the unilateral market power from the congestion rent. We compute the zonal Lerner index during the period 2009 to 2013 for the main generators in the Italian day-ahead market and we analyze the correlation among market power, congestion and RES supply. In particular, we investigate whether RES development has affected congestion and firm's strategic behavior, empirically testing whether structural changes have occurred in market power or in congestion rent. Our results show that the exercise of market power has been considerably weakened during peak hours by the massive competition of RES, but it has been surprisingly reinforced in specific off-peak hours, in the absence of solar RES and in specific zones, where congestion yields market splitting. These findings support pro-competitive market regulation and reform strategies, and shed light on the impact of RES and congestion on market outcomes. [ABSTRACT FROM AUTHOR]

In this paper we pursue two objectives: firstly we construct a theory based behavioral model of electricity demand in the Italian market; secondly we measure demand elasticity at hourly level, directly from consumer behavior. This is a novel approach providing the first attempt in the literature to estimate demand elasticity using individual demand bid data in the Italian Power Exchange (IPEX). Econometric estimation allows us to identify robust results, showing that elasticity varies significantly with: time of the day; day of the week; season of the year; pattern of line congestion; as well as according to the level of equilibrium price. This has meaningful policy implications: fostering more competition on the supply side could yield lower equilibrium prices and proportionately much higher quantities, for a lower offer curve shifted to the right would intersect a flatter portion of the demand curve. [ABSTRACT FROM AUTHOR]

Highlights: [•] A review on the flexibility concept for an application to power systems is reported. [•] Flexibility is used as metric for bulk system operational planning in market context. [•] Bulk System Flexibility Indices (BuSFI) are defined. A calculation tool is realized. [•] A real application of the dedicated tool shows useful results. [•] The Italian TSO is testing BuSFI for assessment on the National Transmission System. [ABSTRACT FROM AUTHOR]

Over the last few years, a strong penetration of Intermittent Renewable Energy Sources (IRES) has been in progress in the Italian power system. In this new framework, the dispatching activity must improve its efficiency to ensure adequacy and security of the national electricity system. European market integration initiatives are making this goal achievable, provided that the coherency of market price signals and reserve procurement at the European level are guaranteed. For this reason, the Italian Transmission System Operator (TSO), Terna, started to investigate the opportunity to align the Italian reserve-procurement approach to the one adopted in most European countries, procuring Replacement Reserve (RR) in dedicated auctions held in advance of the day-ahead market. The aim of this new methodology is to improve the coherency of price signals arising from the integrated European day-ahead market, anticipating potential scarcity conditions, thus helping to keep adequacy standards high. This paper describes the characteristics of a possible new reserve-procurement model based on the European benchmark. Comparative simulations are presented, estimating the impact of the new approach in terms of outcomes and costs of both the energy and ancillary services markets in Italy. The results of this study suggest activation of the reserve auction only in the cases in which the TSO expects a potential risk of simultaneous reserve scarcity across European countries. [ABSTRACT FROM AUTHOR]

• Energy communities. • Economic scenario. • Electricity market. • Techno-economic comparison. • Self-consumption. The European Union has set ambitious targets to move towards a society with high penetration of renewable energy sources. In the forthcoming energy transition, Energy Communities (EC), i.e., legal entities where different actors, including citizens, cooperate in energy generation, storage and management, will play a crucial role. The present work simulates the energy flows and assesses the potential economic benefits of a cluster of buildings acting collectively as an energy community – a specific case study is set in northern Italy by comparing the EC performance with a configuration where customers act as Single Self-Consumers (SSCs). Pending the transposition of EU Directives to binding national laws, due by 2021, different supporting tariffs (economic scenarios) have been simulated in order to determine which scheme will support more effectively the integration of Energy Communities in the national energy market. Results show that ECs (i.e., customers acting collectively as energy prosumers) are able to accelerate the diffusion of building-integrated renewable energy sources (RES), resulting in higher overall self-consumption rates than SSCs. Self-consumed electricity generates savings on the energy bill of EC, and we calculated positive economic performance indicators for all the analysed economic scenarios. The sensitivity analysis carried out on system and transport charges of the electricity bill shows their remarkable impact on the economics making the EC less attractive for investors and citizens without proper supporting schemes. [ABSTRACT FROM AUTHOR]