Assessing the Regional Redistributive Effect of Renewable Power Production Through a Spot Market Algorithm Simulator: The Case of Italy

We develop an algorithm that simulates by iterative splitting the hourly equilibrium (price-quantity) of the Italian day-ahead market. The algorithm is employed to study the sensitivity of equilibria to changes in production from renewable units at different locations. We show that, when power markets are organised on zonal-basis with locational price signals and final buyers pay a unique price for the power bought in the day-ahead market, a larger renewable production decreases the average zonal prices, but the distribution of benefits largely depends on power plants’ localisation. We analyse the impact of a larger renewable production on network congestion occurrence, zonal balance between demand and supply and zonal generation mix as well. We calculate the zonal substitution effects between renewable and non-renewable technologies, and within renewable technologies. Our analysis sheds some lights on the multiple consequences of energy transition policies and highlights the need of prioritizing over policies’ objectives.