Progressive electricity tariffs in Italy and California – prospects and limitations on electricity savings of domestic customers

Panel: 2. Current energy efficiency policies: On stage and backstage

This is a peer-reviewed paper.

Author:
Christian Dehmel, Institut of Political Science, University of Muenster, Germany

Abstract

After the oil crisis in 1973 countries around the globe tried to reduce the electricity consumption of private households by introducing progressive electricity tariffs, invoicing rising kWh price for increasing electricity consumption. Besides the well known cases of California and Japan, in Europe only Italy has introduced a national progressive electricity scheme for private households in 1974.

This paper deals with policy instruments to reduce electricity consumption in private households. The overall question is: what can we learn from policy instruments applied in other countries for a possible transfer to Germany? These question will be answered by conducting a comparative ex-post analysis of the implementation and outcomes of progressive electricity tariffs for households in Italy and California.

Results show that the progressive tariffs have been introduced to reduce electricity consumption, load and independency, but also as a social instrument to redistribute rising costs of electricity from low consumption to high consumption households. Around 90 % of all households in Italy still use the cheapest tariff option connected to low consumption and, beside other structural influences in Italy, some impact on electricity consumption can be assigned to progressive tariffs. Although social reasons - keeping the electricity price low for the majority of customers - seem to stop any major changes in the tariff scheme, today, tariff adjustments are also used to stimulate energy efficiency, especially of high consumption customers. In California, the freezing of social rates after the energy crisis in 2000/01 made it suitable to introduce even higher progressive rates. Although the analyzed instrument-mixes have more or less limitations regarding efficiency and sufficiency impacts, some fruitful lessons and indications for a transfer of these instruments are discussed at the end.