The Impact of Renewable Energy Communities in the Italian Day-Ahead Electricity Market: A Scenario Analysis

This paper evaluates the economic impact of Renewable Energy Communities (RECs) on the Italian wholesale power market. Combining a bottom-up engineering approach with a short-run economic impact assessment, the study begins by mapping existing and emerging RECs in Italy. We identify key characteristics of RECs, such as average installed capacity, institutional profiles of members, types of renewable systems used, and transmission across Italy's electricity market zones. This mapping yields representative REC configurations, which are employed within a bottom-up engineering model to generate energy injection and self-consumption profiles for different REC prosumer and producer categories (residential, public, small and medium enterprise, non-profit organization, and standalone installation), considering the different levels of solar irradiance in Italy based on latitude. These zonal results, aggregated on an hourly basis, inform the implementation of the synthetic counterfactual approach, which develops alternative scenarios (e.g., 5 GW target for REC-driven capacity set by Italian policy for 2027) to assess the impact of REC-driven injection and self-consumption on the Italian day-ahead power market. The findings suggest that REC deployment can increase equilibrium quantities during daylight in most of the time, while decreasing equilibrium quantities mostly during the cold months, as electrified heating drives greater self-consumption and offsets lower grid injections. Both positive and negative effects on equilibrium quantities suggest that REC deployment also has a potential to reduce wholesale electricity prices. Moreover, by reducing grid exchanges through higher self-consumption, REC proliferation can alleviate pressure on the distribution system.