The long-run relationship between the Italian day-ahead and balancing electricity prices

Abstract

We study the convergence of day-ahead prices and balancing prices for the Italian power market. The zonal time-series of the prices are evaluated, seasonally adjusted and tested to assess their long-run properties. We focus on the dynamic behavior of the four continental zones of Italy (North, Central-North, Central-South and South). Using a sample of data that spans the last decade and applying the fractional cointegration methodology, we shows the existence of long-run relationships. This signals the existence of convergence between prices in each zone but zone Central-South, where prices are divergent. We also measure the average price dierence, and analyse how it evolves over time. Price dierentials dynamically reduce for all zones except for Central-South. We comment the results in terms of increasing eciency, and provide an interpretation for the dierences across zones. We also discuss policy consequences for both Italian and other markets.

The participation of small-scale variable distributed renewable energy sources to the balancing services market

“…For the simulation we consider meaningful reference levels for the parameters. To provide intuitive examples, we take as an example figures that are close to the Italian day-ahead and balancing services market, as reported in [39]. In that paper the authors report average figures for upward balancing energy provided by programmable sources connected to the high voltage grid that span from the day-ahead level to twice that value, with average day-ahead prices for the Italian continental zones of about 50 e/MWh (See [39], Table 2).…”

“…To provide intuitive examples, we take as an example figures that are close to the Italian day-ahead and balancing services market, as reported in [39]. In that paper the authors report average figures for upward balancing energy provided by programmable sources connected to the high voltage grid that span from the day-ahead level to twice that value, with average day-ahead prices for the Italian continental zones of about 50 e/MWh (See [39], Table 2). For downward services, the Italian balancing market rules prescribe that downward services are remunerated at a price that spans from null to the corresponding day-ahead one as the upper bound.…”