What’s Up in Italy? Market Liberalization, Tariff Regulation and Incentives to Promote Energy Efficiency in End-Use Sectors

Marcella Pavan, Regulatory Authority for Electricity and Gas

Keywords

Abstract

Increased energy efficiency is one key tool to reduce greenhouse gas (GHG) emissions from the energy system. In a liberalized electricity and gas market new types of incentives should be defined and introduced to promote the market development of new energy technologies and demand-side management programs. The shared understanding is that these incentives should base upon market mechanisms in order to avoid undue subsidization, market opacity and discrimination.

This paper explores recent developments in the promotion of energy efficiency in end-use sectors in Italy, with particular reference to the introduction of an “energy efficiency certificates” trading scheme combined with an “energy efficiency obligation” placed upon electricity and gas distributors, and a cost recovery mechanism via electricity and gas rates. The implementation of such an innovative policy tool-kit poses a number of technical questions and challenges spanning from the choice of the more appropriate impact valuation approaches for energy savings projects, to the setting up of the trading mechanism itself, to the design of effective monitoring and non-compliance schemes, to the sharing of benefits and costs among the different players (users, energy retailers and suppliers, component and services providers, etc).