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Price coordination in vertically integrated electricity markets. Theory and empirical evidence

Bruno Bosco, Lucia Parisio and Matteo Pelagatti

Year: 2016
Volume: Volume 37
Number: Number 1
DOI: 10.5547/01956574.37.1.bbos
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Abstract:
We analyse vertical integration between generators and retailers in electricity markets and we discuss the implications for price decisions of the presence of asymmetric (cost) information in a simple P-A framework. We analyze a situation in which generators post supply bids taking into account the profit of the entire vertically integrated group they belong to. We then discuss the way in which the degree of vertical integration affects this bidding strategy. Using Italian electricity auction data we show how bid prices posted by a pivotal producer are significantly influenced by variables incorporating vertical integration into the econometric model.



The Impact of RES in the Italian Day–Ahead and Balancing Markets

Angelica Gianfreda, Lucia Parisio and Matteo Pelagatti

Year: 2016
Volume: Volume 37
Number: Bollino-Madlener Special Issue
DOI: 10.5547/01956574.37.SI2.agia
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Abstract:
We empirically investigate the effect of RES generation on the Italian spot and regulation prices by examining price dynamics from 2012 to 2014 in day-ahead, intra-daily and balancing market sessions. Intra-day sessions are particularly valuable for intermittent generators willing to adjust their production programs as better weather forecasts become available. We model the relationships among spot, adjustment and regulation prices and provide empirical evidence that the intra-daily sessions are well-functioning and low-cost market tools to ease the introduction of a high share of RES. Conventional production units may bid on all market sessions but we estimate high and significant premia of readiness earned on real-time sessions. Further, we evaluate the relationship among price differences, observed between regulation and spot markets and the amount of wind, solar, hydro, and geothermal production in all Italian zones, generally finding a positive and significant effect on premia.



The RES-Induced Switching Effect Across Fossil Fuels: An Analysis of Day-Ahead and Balancing Prices

Angelica Gianfreda, Lucia Parisio, and Matteo Pelagatti

Year: 2019
Volume: Volume 40
Number: The New Era of Energy Transition
DOI: 10.5547/01956574.40.1.agia
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Abstract:
The empirical literature on electricity markets has highlighted a strong cointegrating relationship governing the dynamics of electricity and fuel prices. More recently the massive introduction of RES in electricity generation, fostered by generous supporting schemes, has influenced the shape and position of the supply function and consequently the equilibrium prices. We believe that the new competitive scenario may have influenced the fuel-electricity nexus with a different impact in day-ahead and balancing markets. Empirical evidence of the evolving fuels-electricity nexus is shown looking at one Italian zone across two samples characterized by a significant change in the level of RES penetration. We conduct the analysis taking into account both day-ahead and, for the first time, balancing market sessions. Results indicate that fuel prices are much less relevant in determining the dynamics of electricity prices in recent years characterized by high RES penetration. On the contrary, taking into account flexible thermal sources, we show that in the second sample balancing and fuel prices (especially gas) are in a long run equilibrium.





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