The Italian Electricity Market: A Focus on Day-Ahead and Intra-Day Auctions

This thesis investigates the Italian electricity market, providing a detailed overview of its structure, segments, and services, including recent regulatory changes such as the replacement of the National Single Price (PUN) with zonal marginal prices from January 1, 2025, and the restructuring of the Intraday Market (IM) from seven auctions to three plus a continuous trading session in 2021. The analysis focuses on prices, both proposed and marginal, in the Day-Ahead Market (DAM) and IM. Two comprehensive datasets covering all electricity transactions by year, day, zone, hour, and auction were used, spanning 2019, 2022, and 2024. The study addresses three research questions: (i) the impact of the 2022 geopolitical crisis on DAM and IM marginal prices, (ii) its effect on the relationship between DAM and IM, and (iii) whether the 2021 Intraday Market reform, which reduced auctions from seven to three, improved market efficiency. To examine these questions, price evolution, event studies, and realized volatility were analyzed for both marginal and proposed prices. DAM-IM spreads, correlations, regression-based interplay, and sequential auction dependencies were also assessed. Results indicate that the 2022 geopolitical crisis triggered a sharp increase in marginal prices across both markets, with intraday prices showing more extreme fluctuations due to short-term balancing needs. The shock temporarily compressed DAM-IM dynamics, reducing the IM’s independent price-discovery role, although partial normalization occurred by 2024. Similarly, the 2021 IM reform initially lowered intraday auction efficiency, but the market gradually adapted. Overall, the findings highlight that Italian electricity market outcomes depend on both exogenous shocks and institutional frameworks. Marginal prices reflect system resilience, while proposed prices capture participants’ uncertainty. The study underscores the importance of robust market design and adaptive bidding strategies to mitigate volatility, enhance efficiency, and ensure stable and reliable market performance under both ordinary and crisis conditions.