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Electricity Tariff Deficit: Temporary or Permanent problem in the EU?

Author

Listed:
  • Asa Johannesson Linden
  • Fotios Kalantzis
  • Emmanuelle Maincent
  • Jerzy Pienkowski

Abstract

In the recent years electricity tariff deficits emerged in Spain, Portugal, Greece and in some other Member States. Tariff deficits are shortfalls of revenues in the electricity system, which arise when the tariffs for the regulated components of the retail electricity price are set below the corresponding costs borne by the energy companies. The objective of this paper is to define and identify the different cases of electricity tariff deficits in Member States. The analysis starts with a description of the functioning of the electricity market in Europe, including price formation and different forms of government intervention, such as support to renewable energy and retail price regulation. Then the paper determines the existence of tariff deficits in the various Member States on the basis of common criteria and describes their common features, as well as particular characteristics of tariff deficits in the countries concerned. An econometric analysis is carried out to identify the drivers of the emergence of a tariff deficit. The final section discusses the impact on the individual firms and on public finances and provides the conclusions.

Suggested Citation

  • Asa Johannesson Linden & Fotios Kalantzis & Emmanuelle Maincent & Jerzy Pienkowski, 2014. "Electricity Tariff Deficit: Temporary or Permanent problem in the EU?," European Economy - Economic Papers 2008 - 2015 534, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:ecopap:0534
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    Cited by:

    1. Colmenar-Santos, A. & de Palacio-Rodriguez, Carlos & Rosales-Asensio, Enrique & Borge-Diez, David, 2017. "Estimating the benefits of vehicle-to-home in islands: The case of the Canary Islands," Energy, Elsevier, vol. 134(C), pages 311-322.
    2. Chiappinelli, Olga & May, Nils, 2022. "Too good to be true? Time-inconsistent renewable energy policies," Energy Economics, Elsevier, vol. 112(C).
    3. Maria Elisabete Neves & Carla Henriques & João Vilas, 2021. "Financial performance assessment of electricity companies: evidence from Portugal," Operational Research, Springer, vol. 21(4), pages 2809-2857, December.
    4. Prata, Ricardo & Carvalho, Pedro M.S. & Azevedo, Inês L., 2018. "Distributional costs of wind energy production in Portugal under the liberalized Iberian market regime," Energy Policy, Elsevier, vol. 113(C), pages 500-512.
    5. Beöthy, Ákos & Kácsor, Enikő & Bartek-Lesi, Mária & Kerekes, Lajos & Kotek, Péter, 2019. "Energiaköltségek hatása a feldolgozóipar költség-versenyképességére [Energy costs and cost competitiveness in the manufacturing sector]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 256-285.
    6. Guittet, Mélanie & Capezzali, Massimiliano & Gaudard, Ludovic & Romerio, Franco & Vuille, François & Avellan, François, 2016. "Study of the drivers and asset management of pumped-storage power plants historical and geographical perspective," Energy, Elsevier, vol. 111(C), pages 560-579.
    7. Nils May & Olga Chiappinelli, 2018. "Too Good to Be True? How Time-Inconsistent Renewable Energy Policies Can Deter Investments," Discussion Papers of DIW Berlin 1726, DIW Berlin, German Institute for Economic Research.
    8. Gómez, Antonio & Dopazo, César & Fueyo, Norberto, 2016. "The “cost of not doing” energy planning: The Spanish energy bubble," Energy, Elsevier, vol. 101(C), pages 434-446.
    9. Gürtler, Konrad & Postpischil, Rafael & Quitzow, Rainer, 2019. "The dismantling of renewable energy policies: The cases of Spain and the Czech Republic," Energy Policy, Elsevier, vol. 133(C).
    10. Aklin, Michaël, 2021. "Do high electricity bills undermine public support for renewables? Evidence from the European Union," Energy Policy, Elsevier, vol. 156(C).

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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