Demand-side policies for power generation in response to the energy crisis: a model analysis for Italy

TL;DR

This paper models the impact of demand-side policies on Italy's power sector amid the energy crisis, highlighting strategies for demand shifting, decarbonization benefits, and resource savings under renewable scenarios.

Contribution

It provides a quantitative analysis of demand-side policies' effects on Italy's power system, considering climate goals and uncertain gas prices.

Findings

Demand shifting to midday is beneficial for policy compliance.

Decarbonization reduces gas power generation by over one third.

Demand management strategies lower fossil fuel use and electricity curtailment.

Abstract

In order to mitigate the impacts of the energy crise, the European Union has proposed various measures. For the power sector a directive prescribes a shift of 5% of the demand in 10% of the peak hours, plus a voluntary 10% overall demand reduction. Here we use a power system model to quantify the implications of this policy for the Italian power sector, as it stands today and under the transformation required to meet the climate goals of the Fit-for-55. We find that policymakers would need to incentivize electricity consumption in the middle of the day while discouraging it in the early morning and late afternoon. We also highlight the benefits of the decarbonization strategy in the context of uncertain gas prices: for a gas price at or above 50 euro/MWh, power generation through gas is reduced by more than one third, approaching what needed to comply with the Fit-for-55. Finally, we quantify the value of demand side management strategies to curb fossil resource consumption and to reduce curtailed electricity under a high renewable scenario.