IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v137y2020ics0301421519307372.html
   My bibliography  Save this article

Managing the liberalization of Italy's retail electricity market: A policy proposal☆

Author

Listed:
  • Stagnaro, Carlo
  • Amenta, Carlo
  • Di Croce, Giulia
  • Lavecchia, Luciano

Abstract

Italy will phase out electricity retail price regulation by July 1st, 2020. Until then, residential customers and small businesses who do not choose their supplier are served under a regulated tariff named “maggior tutela” (greater protection), supplied by the local distributor at a price set by the regulator. We review the literature on electricity retail competition – with particular regard to its expected effects on prices, innovation, and customer engagement – and the conditions under which competition is expected to deliver benefits. We perform a Structure-Conduct-Performance analysis of Italy's retail electricity market for residential customers, finding two issues potentially problematic: excessive market concentration and low customer engagement. We propose a phase-out mechanism that relies on graduality, asymmetric regulation, and a mandatory, opt-out collective switching exercise. The mechanism aims to rapidly reduce market concentration by leveraging behavioral incentives to customers to switch to the cheapest supplier.

Suggested Citation

  • Stagnaro, Carlo & Amenta, Carlo & Di Croce, Giulia & Lavecchia, Luciano, 2020. "Managing the liberalization of Italy's retail electricity market: A policy proposal☆," Energy Policy, Elsevier, vol. 137(C).
    • Handle: RePEc:eee:enepol:v:137:y:2020:i:c:s0301421519307372
    DOI: 10.1016/j.enpol.2019.111150
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421519307372
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2019.111150?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Littlechild, Stephen, 2018. "Competition, regulation and price controls in the GB retail energy market," Utilities Policy, Elsevier, vol. 52(C), pages 59-69.
    2. Shin, Kong Joo & Managi, Shunsuke, 2017. "Liberalization of a retail electricity market: Consumer satisfaction and household switching behavior in Japan," Energy Policy, Elsevier, vol. 110(C), pages 675-685.
    3. Jaison Abel & Michael Clements, 2001. "Entry under Asymmetric Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(2), pages 227-242, September.
    4. Littlechild Stephen C., 2002. "Competition in Retail Electricity Supply," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(2), pages 1-26, June.
    5. Batalla-Bejerano, Joan & Costa-Campi, Maria Teresa & Trujillo-Baute, Elisa, 2016. "Collateral effects of liberalisation: Metering, losses, load profiles and cost settlement in Spain’s electricity system," Energy Policy, Elsevier, vol. 94(C), pages 421-431.
    6. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    7. Saskia Lavrijssen & Arturo Carrillo Parra, 2017. "Radical Prosumer Innovations in the Electricity Sector and the Impact on Prosumer Regulation," Sustainability, MDPI, vol. 9(7), pages 1-21, July.
    8. Anna Airoldi & Michele Polo, 2017. "Opening the Retail Electricity Markets: Puzzles, Drawbacks and Policy Options," IEFE Working Papers 97, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    9. Philippe Aghion & Stefan Bechtold & Lea Cassar & Holger Herz, 2018. "The Causal Effects of Competition on Innovation: Experimental Evidence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(2), pages 162-195.
    10. Swadley, Adam & Yücel, Mine, 2011. "Did residential electricity rates fall after retail competition? A dynamic panel analysis," Energy Policy, Elsevier, vol. 39(12), pages 7702-7711.
    11. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009, Elsevier.
    12. L. Lynne Kiesling, 2010. "Promoting Innovation In The Electricity Industry," Economic Affairs, Wiley Blackwell, vol. 30(2), pages 6-12, June.
    13. Stephen Littlechild, 2016. "Contrasting Developments in UK Energy Regulation: Retail Policy and Consumer Engagement," Economic Affairs, Wiley Blackwell, vol. 36(2), pages 118-132, June.
    14. Stephen Littlechild, 2008. "Municipal aggregation and retail competition in the Ohio energy sector," Journal of Regulatory Economics, Springer, vol. 34(2), pages 164-194, October.
    15. Catherine Waddams Price & Minyan Zhu, 2016. "Empirical Evidence Of Consumer Response In Regulated Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 12(1), pages 113-149.
    16. Carlo Stagnaro, 2017. "Competition and Innovation in Retail Electricity Markets: Evidence from Italy," Economic Affairs, Wiley Blackwell, vol. 37(1), pages 85-101, February.
    17. Eakin, Kelly & Faruqui, Ahmad, 2000. "Bundling Value-Added and Commodity Services in Retail Electricity Markets," The Electricity Journal, Elsevier, vol. 13(10), pages 60-68, December.
    18. Catherine Waddams Price, 2018. "Back to the Future? Regulating Residential Energy Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 25(1), pages 147-155, January.
    19. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    20. Stigler, George J., 1983. "The Organization of Industry," University of Chicago Press Economics Books, University of Chicago Press, number 9780226774329, November.
    21. Hardy, A. & Glew, D. & Gorse, C., 2019. "Assessing the equity and effectiveness of the GB energy price caps using smart meter data," Energy Policy, Elsevier, vol. 127(C), pages 179-185.
    22. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Humberto Verdejo-Fredes & Fernando García-Muñoz & Francisco Tobar & Cristhian Becker & Mauricio Olivares & Juan Zolezzi & Guillermo Guzmán, 2022. "Retail Electricity Market Liberalization: An Overview of International Experience and Effects on the Chilean Regulated Tariff," Sustainability, MDPI, vol. 14(21), pages 1-21, October.
    2. Humberto Verdejo Fredes & Benjamin Acosta & Mauricio Olivares & Fernando García-Muñoz & Francisco Tobar & Vannia Toro & Cesar Smith & Cristhian Becker, 2021. "Impact of Energy Price Stabilization Mechanism on Regulated Clients’ Tariffs: The Case of Chile," Sustainability, MDPI, vol. 13(21), pages 1-20, October.
    3. Massimo Dragotto & Marco Magnani & Paola Valbonesi, 2021. "Consumer inertia and firm incumbency in liberalised retail electricity markets: an empirical investigation," "Marco Fanno" Working Papers 0277, Dipartimento di Scienze Economiche "Marco Fanno".
    4. Stagnaro, Carlo & Amenta, Carlo & Di Croce, Giulia & Lavecchia, Luciano, 2017. "La liberalizzazione del mercato elettrico - Una proposta per superare la maggior tutela [The liberalization of Italy's retail electricity market: a policy proposal]," MPRA Paper 81768, University Library of Munich, Germany.
    5. Ivan Faiella & Luciano Lavecchia, 2021. "Households' energy demand and the effects of carbon pricing in Italy," Questioni di Economia e Finanza (Occasional Papers) 614, Bank of Italy, Economic Research and International Relations Area.
    6. Amenta, Carlo & Aronica, Martina & Stagnaro, Carlo, 2022. "Is more competition better? Retail electricity prices and switching rates in the European Union," Utilities Policy, Elsevier, vol. 78(C).
    7. Graça Gomes, João & Jiang, Juan & Chong, Cheng Tung & Telhada, João & Zhang, Xu & Sammarchi, Sergio & Wang, Shuyang & Lin, Yu & Li, Jialong, 2023. "Hybrid solar PV-wind-battery system bidding optimisation: A case study for the Iberian and Italian liberalised electricity markets," Energy, Elsevier, vol. 263(PD).
    8. Wang, Pengyu & Fang, Debin & Wang, Shuyi, 2022. "Optimal dynamic regulation in retail electricity market with consumer feedback and social learning," Energy Policy, Elsevier, vol. 168(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Amenta, Carlo & Aronica, Martina & Stagnaro, Carlo, 2022. "Is more competition better? Retail electricity prices and switching rates in the European Union," Utilities Policy, Elsevier, vol. 78(C).
    2. Stagnaro, Carlo & Amenta, Carlo & Di Croce, Giulia & Lavecchia, Luciano, 2017. "La liberalizzazione del mercato elettrico - Una proposta per superare la maggior tutela [The liberalization of Italy's retail electricity market: a policy proposal]," MPRA Paper 81768, University Library of Munich, Germany.
    3. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    4. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563, Elsevier.
    5. Ghosal, Vivek, 2007. "Small is Beautiful but Size Matters: The Asymmetric Impact of Uncertainty and Sunk Costs on Small and Large Businesses," MPRA Paper 5461, University Library of Munich, Germany.
    6. Hien Tran & Enrico Santarelli & Enrico Zaninotto, 2015. "Efficiency or bounded rationality? Drivers of firm diversification strategies in Vietnam," Journal of Evolutionary Economics, Springer, vol. 25(5), pages 983-1010, November.
    7. Ghosal, Vivek, 2002. "Impact of Uncertainty and Sunk Costs on Firm Survival and Industry Dynamics," Royal Economic Society Annual Conference 2002 86, Royal Economic Society.
    8. Steen, Frode & Sorgard, Lars, 1999. "Semicollusion in the Norwegian cement market," European Economic Review, Elsevier, vol. 43(9), pages 1775-1796, October.
    9. Hackl, Franz & Kummer, Michael E. & Winter-Ebmer, Rudolf & Zulehner, Christine, 2014. "Market structure and market performance in E-commerce," European Economic Review, Elsevier, vol. 68(C), pages 199-218.
    10. Martin Gaynor, "undated". "What Do We Know About Competition and Quality in Health Care Markets?," GSIA Working Papers 2006-E62, Carnegie Mellon University, Tepper School of Business.
    11. Valentiny, Pál, 2019. "Közgazdaságtan a jogalkalmazásban [Forensic economics]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 134-162.
    12. Wright, Mark, 2004. "Firm Size Dynamics in the Aggregate Economy," Santa Cruz Department of Economics, Working Paper Series qt4rs4202s, Department of Economics, UC Santa Cruz.
    13. Behrens, Kristian & Murata, Yasusada, 2012. "Trade, competition, and efficiency," Journal of International Economics, Elsevier, vol. 87(1), pages 1-17.
    14. Marcus Wagner, 2004. "The Porter Hypothesis Revisited: A Literature Review of Theoretical Models and Empirical Tests," Public Economics 0407014, University Library of Munich, Germany.
    15. Asplund, Marcus, 2002. "Risk-averse firms in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 995-1012, September.
    16. Derek Bosworth & Joanne Loundes, 2002. "The Dynamic Performance of Australian Enterprises," Melbourne Institute Working Paper Series wp2002n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    17. Der-Fang Hung, 2015. "Sustained Competitive Advantage and Organizational Inertia: The Cost Perspective of Knowledge Management," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(4), pages 769-789, December.
    18. Marcelo Resende, 2009. "Concentration and market size: lower bound estimates for the Brazilian industry," Economics Bulletin, AccessEcon, vol. 29(3), pages 2465-2471.
    19. Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 1-18, February.
    20. Sascha A. Weber & Sven M. Anders, 2007. "Price rigidity and market power in German retailing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 737-749.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:137:y:2020:i:c:s0301421519307372. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.