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.
Highlights
Over the past decades, with growing concern about increasing concentrations of atmospheric pollutants and reducing dependency on fossil fuels, the generation of energy from renewable energy sources (RESs) has become a priority worldwide
To control time-specific trends in electricity markets, we considered 23 dummy variables representing the hour of the day (1 a.m. to 11 p.m.), 6 dummy variables representing the day of the week (Monday to Saturday), and 11 dummy variables representing the month (January to November)
This section first explains the impact of wind and solar production on zonal net input flow, Section 4.1, and describes the Merit Order Effect (MOE) in the zonal market (Section 4.2)
Summary
With growing concern about increasing concentrations of atmospheric pollutants and reducing dependency on fossil fuels, the generation of energy from renewable energy sources (RESs) has become a priority worldwide. Changes in the supply curve and generation mix can lead to changes in the price This phenomenon is the so-called Merit Order Effect (MOE) [7,8,9]. In the third estimation, the merit order effect of wind and solar generation is quantified based on the developed empirical approach in [10,11,12]. In this regard, we use a daily average of hourly zonal market data to estimate econometric models that relate the zonal electricity price to the electricity produced by wind and solar.
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