For languages $L_1$ and $L_2$, the concatenation of $L_1$ with $L_2$ is defined elmentwise as:
$$L_1L_2=\{s_1s_2\mid s_1\in L_1\land s_2\in L_2\}$$
(at least in every case that I have seen)
The concatenation of a language $L$ with the empty languae is thus:
$$L\emptyset = \{s_1s_2\mid s_1\in L\land s_2\in\emptyset\}$$
By definition, $x\notin\emptyset$ for all $x$, so $(s_1\in L)\land (s_2\in \emptyset) \equiv (s_1\in L)\land \bot \equiv \bot$. Hence $L\emptyset=\{s_1s_2\mid\bot\}=\emptyset$ for any language $L$.
It stands to reason that the identity element of $\mathcal{P}(\Sigma^*)$ would be $E=\{\varepsilon\}$, where $\varepsilon$ is the empty string. This follows from $LE=EL=L$ for all $L\in\mathcal{P}(\Sigma^*)$.
For a more "mathy" take, consider the following:
Claim: If $\mathcal{P}(\Sigma^*)$ with language concatenation is a monoid, then $E=\{\varepsilon\}$ is the identity element.
proof-sketch: By definition, if $M$ is a monoid, then $M$ contains a unique identity element $e$ satisfying $xe=ex=x$ for all $x\in M$. Observe that for all $s\in\Sigma$, $s\varepsilon=\varepsilon s=s$ where $\varepsilon$ is the empty string.
If $E=\{\varepsilon\}$ is the language containing the empty string, then for all $L\in\mathcal{P}(\Sigma^*)$...
$$LE=\{le\mid l\in L\land e\in E\}=\{l\varepsilon\mid l\in L\}=\{l\mid l\in L\}=L$$
...and...
$$EL=\{el\mid e\in E\land l\in L\}=\{\varepsilon l\mid l\in L\}=\{l\mid l\in L\}=L$$
Whence...
$$LE=EL=L$$
Thus, $E$ is the unique identity of the monoid $P(\Sigma^*)$. Q.E.D.