From Price Shocks to Stability: The Role of Energy Communities in Electricity Market Volatility and Uncertainty

Renewable energy communities (RECs) are increasingly recognized as a strategic instrument for enhancing the sustainability and resilience of energy systems, promoting local renewable integration, and reducing consumer exposure to electricity market volatility. This study analyzes the Italian electricity market and assesses the economic performance of RECs relative to individual consumers using high-frequency hourly data from 2021 to 2023, covering both the 2022 European energy crisis and the subsequent Italian regulatory reform of incentive mechanisms. The optimization problem is formulated in physical terms, aiming to maximize locally utilized energy, defined as the sum of self-consumed and shared photovoltaic generation. This choice reflects the structure of the Italian regulatory framework, where incentives are directly linked to the amount of energy shared within the community. In this context, energy-based optimization is preferred to avoid embedding assumptions on discount rates, investment horizons, and financing conditions, which may vary significantly across users and introduce additional uncertainty. From a sustainability perspective, maximizing local energy utilization contributes to improving energy efficiency, reducing reliance on external energy sources, and enhancing the capacity of decentralized systems to absorb market shocks. For this reason, economic indicators such as Net Present Value (NPV) or payback period are not explicitly included in the optimization objective. This is justified by the focus of the analysis on short-term operational performance and exposure to electricity price volatility, rather than long-term investment evaluation. Moreover, given that the economic value of the REC is largely determined by shared energy volumes under the current Italian incentive scheme, maximizing local energy utilization provides a consistent proxy for economic performance. Nevertheless, the integration of financial metrics such as NPV or payback period represents a relevant extension for future research, particularly in the context of investment decision-making. Through panel econometric analysis, we estimate the sensitivity of economic value to electricity price fluctuations. Results show that RECs reduce price sensitivity by approximately 8–15% compared to individual users, as estimated by panel regression coefficients. Furthermore, the volatility of economic value decreases by around 1.95% under the community configuration, particularly during the 2022 price shock demonstrating that RECs exhibit significantly lower price dependence than standalone consumers. To assess the robustness of these findings, a machine learning framework is employed to relax linearity assumptions and capture potential non-linear effects. Results consistently show that while market prices remain an important determinant, RECs substantially attenuate their impact, particularly during periods of extreme price stress. A policy counterfactual comparison between pre- and post-reform incentive structures further indicates that the coefficient of variation decreases by approximately 4.4% under the post-reform incentive scheme, highlighting the role of policy design in supporting economically and operationally sustainable energy communities. Overall, this study develops a data-driven analysis based on a high-frequency synthetic dataset designed to reproduce realistic consumption and generation dynamics, providing robust evidence that RECs contribute not only to renewable energy deployment but also to the economic and systemic sustainability of electricity markets under conditions of high volatility.