Modeling Methodology to Assess the Impact of Demand Elasticity on the Italian Electricity System in a European Context

The European electricity system is under transformation. Increasing share of renewable energy sources in electricity generation requires innovative solutions for keeping generation and demand in balance. Shifting from a demand driven to a generation driven electricity system calls for new strategies as demand response, i.e. flexibility of electricity consumers to electricity prices. However, currently, techno-economic modeling of the electricity system does not take this flexibility into account, since it is mainly carried out assuming inelastic demand. Addressing this issue, this paper presents a methodology to incorporate elastic demand through demand functions into an economic dispatch model, which emulates the day-ahead market. The generation costs minimization problem renders generation dispatch and prices. An impact of demand elasticity, when changes occur to the electricity system, is explored through an Italian case study in a European context. Results show that modeling demand elasticity provides additional flexibility to the power dispatch algorithm that can even, in some cases, balance out the effects of introducing electricity transmission capacity constraints between bidding zones in Italy.