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Renewable Generation and Network Congestion: an Empirical Analysis of the Italian Power Market

Faddy Ardian, Silvia Concettini, and Anna Creti

Year: 2018
Volume: Volume 39
Number: Special Issue 2
DOI: 10.5547/01956574.39.SI2.fard
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Abstract:
This article empirically investigates the impact of renewable production on congestion using a unique database on the Italian Power Market, where zonal pricing is implemented. We estimate two econometric models: a multinomial logit model, to assess whether renewables increase the occurrence of congestion, and a two stage least squares (2SLS) model to evaluate the impact of wind and photovoltaics on congestion costs. Our analysis suggests that larger renewable supply in importing regions decreases the probability of congestion compared to the no congestion case, while the reverse occurs when renewable production is located in an exporting region. The 2SLS estimations reveal that the same mechanisms explain the level of congestion costs. Our results also highlight that the magnitude of the congestion effects, both in terms of probability and costs, is very sensitive to the location of the historical efficient production, mainly hydro power, and to the geographical configuration of the transmission network.



Special Issue "Energy Challenges in an Uncertain World" Editorial

Anna Creti, Duc Khuong Nguyen, and Lutz Kilian

Year: 2018
Volume: Volume 39
Number: Special Issue 2
DOI: 10.5547/01956574.39.SI2.acre
No Abstract



Oil Price Risk and Financial Contagion

Khaled Guesmi, Ilyes Abid, Anna Creti, and Julien Chevallier

Year: 2018
Volume: Volume 39
Number: Special Issue 2
DOI: 10.5547/01956574.39.SI2.kgue
View Abstract

Abstract:
In this paper we test for the existence of equity market contagion, originating from oil price fluctuations, to regional and domestic stock markets. The data are collected over the period from April 1993 to April 2015. We apply an empirical multifactor asset pricing model with three-factor setting to capture the unexpected return and disentangle simple correlation due to fundamentals and contagion. We investigate four regions: the European Monetary Union (EMU), Asia-Pacific (AP), the Non-European Monetary Union (NEMU) and North America (NA). We define contagion as the excess correlation that is not explained by fundamental factors. Oil price risk is shown to be a factor as important as contagion. In addition, oil price fluctuations amplify contagion in the context of regional markets strongly interlinked with the USA.





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