Working papers
Optimal investment in storage in a distributed renewable energy system
Castellini, M., D’Alpaos, C., Fontini, F., Moretto, M. (2025). FEEM Working paper Nr 06.2025, Fondazione Eni Enrico Mattei Milano, Italy. Series ISSN: 2037-1209. http://dx.doi.org/10.2139/ssrn.5144445
Abstract: Renewable energy production plays a crucial role in the energy transition. However, many renewable energy sources (RES) are intermittent, and there is often a mismatch between energy production and consumption, which can be partially solved by storage. In this paper, we investigate the investment decision in a photovoltaic (PV) power plant coupled with a Battery Energy Storage System (BESS), namely an Energy Storage System (ESS). We aim to investigate the relationship between the net present value (NPV) of the investment and the technical implications related to the maximum amount of energy to be stored while also accounting for the impact of energy prices. In our setting, the BESS is connected to the national power grid and the PV plant. Energy can be produced, purchased from the grid, stored, self-consumed, and fed into the grid. PV production and energy consumption loads evolve stochastically over time. In addition, as BESS are costly, energy stored has an opportunity cost, which depends on the prices of energy purchased from the grid and energy fed in and sold to the grid, respectively. However, BESS can significantly contribute to increase ESS managerial flexibility and, in turn, ESS value. In detail, we investigate the optimal BESS size that minimizes ESS net operating costs. We also provide insights on ESS optimal management strategy. Our results show that ESS net operating costs are relatively small. They reduce for increasing selling prices of energy, whereas they increase for increasing volatility of the stock of energy stored in the battery.
Balancing Climate Policies and Economic Development in the Mediterranean Countries
Castelli, C., Castellini, M., Gusperti, C., Lupi, V. and Vergalli, S. (2024). FEEM Working paper Nr 20.2024,, Fondazione Eni Enrico Mattei Milano, Italy. Series ISSN: 2037-1209. https://dx.doi.org/10.2139/ssrn.4899473
Abstract: The goal of this work is to improve the spatial representation of the Regional Dynamic Integrated model of Climate and the Economy (RICE), in its ’99 version, focusing on the Mediterranean countries, while also updating the calibration to the base year 2015. We evaluate the impact of climate damages and temperature changes in several scenarios, drawing comparisons across regions. Thanks to the theoretical structure of the model, which considers energy as an explicit input factor, we examine macroeconomic and energy indicators across regions. We find that a general slow down in economic growth is needed to decrease emissions and keep temperature change within 2°C by the end of this century. Our results are embedded in a framework showing the costs of delaying the energy transition. Our figures relies on fossil-fuel inputs and exogenous energy saving improvements.
Renewable energy communities, digitalization and information
Bergemann, D., Bertolini, M., Castellini, M., Moretto, M. and Vergalli, S. (2022). FEEM Working paper Nr 037.2022. Fondazione Eni Enrico Mattei Milano, Italy. Series ISSN: 2037-1209. https://dx.doi.org/10.2139/ssrn.4294765
Abstract: In this work we study the case of agents willing to engage in a Renewable Energy Community (REC). The municipality – being the promoter of the REC – burdens all the investment costs (RE plants, storage, local grid interventions) and entrusts an aggregator of its operation paying a fixed tariff. The latter, acting as a monopolist, is also the sole supplier of energy for the REC’s members. The management of the REC requires the collection of energy data from the members to assure its efficient operation on the side of the self-consumption and exchange of energy within it. Such data allow also the identification of the agents’ preferences across energy devices and are an additional source of revenues for the aggregator thanks to their sell to third parts. This behaviour translates into a dis-utility the agents, which we call privacy cost. In such a framework, we consider also uncertainty on the side of the investment cost. On the basis of the outcomes of our model, we are able to study the effect of data collection policy performed by the aggregator on the size of the REC, while also accounting for agents’ valuation and the role of uncertainty on the investment cost side.
Publications
Exploring macroeconomic models in the water, energy, food, and ecosystem (WEFE) field: A comprehensive review.
Castelli, C., Castellini, M., Gusperti, C., Romani, I. G., Ciola, E. and Vergalli, S. (2024). Environmental Research Letters – Topical Review. Vol. 19, 053003. https://doi.org/10.1088/1748-9326/ad404c
Abstract. This study conducts a comprehensive review of macroeconomic models within the Water, Energy, Food, and Ecosystem (WEFE) nexus, considering four different approaches: computable general equilibrium (CGE) models, integrated assessment models (IAMs), agent-based models (ABMs), and dynamic stochastic general equilibrium (DSGE) models. Specifically, we examine how macroeconomic models represent not only the WEFE nexus as a whole but also its individual components and their combinations. Spanning a collection of 77 papers published in the last 20 years, this review underscores the prevalence of CGE models and IAMs, followed by ABMs, as dominant avenues of research within this field. CGE models frequently investigate interconnections between pairs of WEFE elements, while IAMs focus on the whole nexus. At the same time, ABMs do not exhibit a clear pattern, whereas DSGE models predominantly concentrate on the energy component alone. Overall, our findings indicate that the development of DSGE models and ABMs is still in its early stages. DSGE models potentially allow the analysis of uncertainty and risk in this field, while ABMs might offer new insights into the complex interactions between natural and human systems but still lack a common framework.
Synergies of CGE and IAM modelling for climate change implications on WEFE nexus in the Mediterranean.
Raviv, O., Palatnik, R, Castellini, M., Sirota, J., Gusperti, G., Vergalli, S., and Shechter, M. (2024). Climate Risk Management – 100608. https://doi.org/10.1016/j.crm.2024.100608
Abstract. A comprehensive analysis of the WEFE nexus is essential for a coherent examination of climate policy and future pathways for the economy and the natural environment. Using a dual-modeling approach, this research assesses the impacts of alternative water sources and irrigated agriculture within the MSB amidst uncertainties of CC-driven extreme events. A global computable general equilibrium (CGE) model, based on the GTAP framework, was used to examine inter-sectoral and inter-regional impacts. In tandem, the Integrated Assessment Model (IAM) based on the RICE-99 framework quantifies the uncertainties related to future extreme climatic events. This synergistic approach provides a comprehensive assessment of CC impacts, integrating adaptation strategies for alternative water sources and irrigated agriculture, as well as mitigation strategies to reduce greenhouse gas emissions from energy production.
Ecosystem degradation and the spread of Covid-19.
Castelli, C., Castellini, M., Comincioli, N., Parisi, M. L., Pontarollo, N., and Vergalli, S. (2023) Environmental Monitoring and Assessment, 195(7), 836. https://doi.org/10.1007/s10661-023-11403-6
Abstract. The linkages between the emergence of zoonotic diseases and ecosystem degradation have been widely acknowledged by the scientific community and policy makers. In this paper we investigate the relationship between human overexploitation of natural resources, represented by the Human Appropriation of Net Primary Production Index (HANPP) and the spread of Covid-19 cases during the first pandemic wave in 730 regions of 63 countries worldwide. Using a Bayesian estimation technique, we highlight the significant role of HANPP as a driver of Covid-19 diffusion, besides confirming the well-known impact of population size and the effects of other socio-economic variables. We believe that these findings could be relevant for policy makers in their effort towards a more sustainable intensive agriculture and responsible urbanisation.