Prospective Climate Change Impacts upon Energy Prices in the 21ST Century: A Case Study in Italy

Abstract

The assessment of the effect of the electricity price on energy production is important when studying the profitability and benefits of energy systems. The demand and price of electricity depends upon societal and economic development, but it is subject to a seasonal, weather-dependent variability, and possibly to long-term variation under climate change. Here, we developed a methodology to model the energy demand and electricity price in response to gross domestic product (GDP), temperatures, and random factors, usable for the purpose of cost/benefit analysis of production systems. The method was applied to the case study of the Italian electricity market, showing acceptable capacity of modelling recently observed price fluctuations. Then, we gathered climate projections until 2100 from three global climate models of the IPCC AR5, under RCP2.6, RCP4.5, and RCP8.5, and we produced future scenarios of price fluctuations for two reference decades, half-century 2040–2049, and end-of-century 2090–2099. Our scenarios displayed a potential for the reduction of energy demand in winter, and an increase in summer and spring, and for the similarly-changing electricity price throughout the 21st century. We discuss the application of our model with the specific aim of the projection of future hydropower production, as controlled by climate, hydrology, demand, and price constraints, with examples from recent studies. Our results provide a tool for modelling the behaviour of energy systems based upon knowledge of external factors, usable for further investigation of energy systems, such as hydropower, and others, taking into account the key variables affecting energy production and energy price.