Luigi De Paoli

Italian Energy Policy: From Planning to an (Imperfect) Market

Energy has unquestionably been the subject of public intervention for a long time though its political importance dates from the first oil shock in 1973. This is particularly true in the case of Italy which, at the time depended on oil, almost all of it imported, for approximately 75% of its energy needs. Consequently, it was obvious that the risk of an energy supply shortage was a problem of paramount political importance. But with time, the attitude of Italian politicians towards this issue has changed quite substantially and the old concerns of energy policy have to some extent diminished in importance. This change corresponds with the more general evolution in the spirit of public intervention in the economy as well as the changed perceptions of the problems posed by the wider national and international events.

The EU climate and energy policy: what about the new targets for 2030?

The EU climate and energy policy for 2020 is summed up by three goals called 20-20-20: a) reduce GHG emissions by 20% compared to 1990; b) save 20% of the EU’s energy consumption compared to projections for 2020; c) develop a 20% share of renewable energies in overall EU energy consumption by 2020. In 2013 the EU Commission issued a Green paper to launch a debate on what should be the objectives for 2030 and early 2014 has published its proposals. This article shares the priority given in the Commission’s communication of January 2014 to the objective of reducing greenhouse gas emissions and argues that this should be the only target set in quantitative terms. Instead, the proposal of continuing to make use of the EU-ETS, although reformed with the introduction of a reserve stability fund, is not shared. In place of this solution, it is suggested to introduce a carbon tax, to be revised (and raised) periodically, based on the reduction of GHG emissions. Its level should be such that the coal power plants without CCS become no longer competitive in a few years. A less preferable solution would be to maintain the cap-and-trade with a floor and ceiling price. The promotion of renewables certainly deserves to be continued, but without quantitative mandatory targets that are not required neither at the European level nor at the level of individual Member States. Moreover, the RES support has to avoid distorting the internal market for electricity. Instead, a common European system of promotion of renewable should be introduced, with clear and limited objectives. Finally, the increase in energy efficiency should also continue to be promoted, but without any quantitative target that would be very difficult to establish and monitor.

Bilancio della liberalizzazione del mercato dell'elettricità e del gas in Italia: 1999-2009

Ten years after the liberalization of the electricity and gas market in Italy it is possible to draw an evaluation of the achievements. The three key objectives of the single market mentioned in the original proposal of the European Commission have been achieved differently in the power market and in the gas sector. The exchanges with foreign countries has increased in the gas sector, but not in the electricity. The security of supply in both sectors has grown thanks to the investments. The price for final consumers has two parts: the competitive and the regulated one. The industrial component has only marginally decreased. Instead the costs for network utilization diminished more sensibly due to regulator intervention. The convergence of Italian prices compared to those in Europe was more modest in the electricity than in the gas sector. The industrial structure in both sectors has changed a lot. Much more players are operating now and the degree of concentration in all segments fell. This announces an increase in competition. Finally, there was a significant international opening both because some Italian companies have made significant investments abroad and because many foreign companies, especially European, are now present in the Italian energy market.

Blackout, sviluppo delle reti e liberalizzazione del settore elettrico

On 28 September 2003, Italy experienced the worst blackout in its history. Other blackouts also occurred in August and September 2003 in the USA, Denmark, Sweden and, on a smaller scale, in England. The coincidence of these events could make one think that liberalization endangers the security of electricity supply. This article attempts to shed some light on this hypothesis starting from the root causes of the 2003 blackouts. The conclusion is that the regulatory and organizational changes in the electricity sector led an increase in the electricity exchanges and modified the incentives of the transmission system operators (TSOs). In a liberalized context, blackouts should be prevented by a good mix of regulation, industrial initiatives and public intervention. This is the only way to maintain the needed collaboration between the TSOs and to ensure the development and maintenance of the transmission equipment.

The EU Emissions Trading System: For an effective and viable reform

The European Union Emissions Trading System (EU ETS or simply ETS) has now been in place for more than 10 years. There is broad consensus that, although emissions have been below the intended objective during this period, this result is hardly due to the ETS. In these 10 years, several changes have been introduced to the initial rules. Lately, the European Council and Parliament, based on proposals from the European Commission (EC), decided to reform the ETS by introducing a market stability reserve (MSR) with the aim of overcoming the lack of effectiveness regarding ETS, as implicitly recognized by these institutions. In fact, there were other possibilities for reforming the ETS. The purpose of this paper is to present the reasons that favour the introduction of a reserve price for auctions of EU emissions allowances (EUAs) as soon as possible, but at least by the fourth phase of the ETS. It also explains why it would be an effective and no-regret option to start from a low level of the reserve price and reaching in about ten years the level making it convenient to switch from coal to gas in electricity production. The paper is divided into five sections. The first section summarizes the key stages of the history the EU ETS with some comments. The second section analyses the factors that explain the reduction in emissions, particularly during the second phase of the ETS. The next section examines the decisions that have been taken regarding the amount of primary offering of emission permits. The fourth section discusses the reasons that have led to the surplus of permits in circulation since the end of the second ETS phase and the remedies proposed by the European Commission. Finally, the paper presents the case for the introduction and fixing of the minimum and maximum price during the auction for the sale of permits.

The competitiveness of nuclear energy in an era of liberalized markets and restrictions on greenhouse-gas emissions

The competitiveness of nuclear energy in an era of liberalized markets and restrictions on greenhouse-gas emissions - The debate on the benefits of nuclear energy revolves around the very competitiveness of this energy source. This article tries to show why it is not easy to answer unambiguously the question whether or not it is convenient to resort to nuclear power in a given country. After listing the factors on which the cost of electricity generation rests and discussing the range of probability of their value, the levelized cost of electricity generation from nuclear, coal and gas-fired plants is calculated using the Monte Carlo method. The results show that nuclear power is likely to be competitive, especially if policies to combat CO2 emissions will continue in the coming decades. There are, however, some margins of uncertainty, mainly related, to the one hand, to the cost of nuclear plants, that depends on the socio-institutional context, and on the other, to the fossil fuels cost, that are inherently difficult to anticipate even on average. Finally it is noted that the context of liberalized electricity markets may make it more difficult for investors to accept the risk of investing in nuclear power plants and for the community to socialize some of the costs associated with this technology. Key words: Nuclear energy, generation costs, Montecarlo method, environmental impacts. JEL classifications: G11, H23, L72, L94, Q31, Q40

La promozione dell'efficienza energetica in Italia

The promotion of energy efficiency in Italy (by Luigi De Paoli e Luca Bongiolatti) - ABSTRACT: In 2004 Italy introduced an obligation for electricity and gas distribution companies to reach specific objectives regarding the improvement of energy efficiency in final energy consumption. The scope of the provision is to promote investments in energy efficiency in order to meet the greenhouse gases reduction target set by the Kyoto protocol. The adoption of binding targets of energy efficiency will also lead to the development of an energy services market, modifying the traditional relation between energy dealers and final consumers, thus leading to a more efficient use of the available resources. Similar mechanisms have already been applied in other European countries (as France and United Kingdom) and will be likely introduced in other countries with the implementation of European Directive on energy end-use efficiency and energy services. This paper describes and analyzes both the measures adopted in Italy and the results obtained after the first year of operation of the mechanism. The paper is divided in six different sections. In the first part we highlight the main problems related to the development of system based on tradable white certificates. In the second part we provide a brief description of the Italian regulatory context. In the third part there is an economic analysis of investments in energy efficiency. The fourth part considers the different options that distribution companies face in order to reach the energy efficiency targets. The fifth part shows the results obtained after the first year of operation of the mechanism. Finally, we propose some possible modifications to the scheme adopted in Italy considering the results obtained and the alternative solutions already applied in France and United Kingdom. JEL classification: Q400, Q480