Open Conference Systems, 50th Scientific meeting of the Italian Statistical Society

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Quantile merit order and network upgrade effects: evidence on Italian wholesale power prices
Alessandro Sapio

Last modified: 2018-05-29


This paper estimates the effects on the Italian wholesale electricity prices of the increasing penetration of renewables and new interconnection links. Quantile autoregressive models, augmented with explanatory variables accounting for the supply of renewables and the inception of a new cable (SAPEI, linking Sardinia with the Italian peninsula), are estimated on daily data about the Italian zonal electricity prices in the 2005-2015 time window. The results confirm the merit order effects detected in the existing literature, but only for wind power, mainly in market conditions characterised by moderately low levels of demand, and with an implied increase in volatility. The new cable, instead, has apparently challenged the ability of power generating companies to extract value through price spikes, and mitigated volatility. Some differences across zonal markets are nonetheless detected.

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