The Restructuring of the Italian Electricity Sector: Proposals for the Inclusion of Objectives for Increased Energy Efficiency and Renewables Exploitation

A profound restructuring of the electricity industry is underway in Italy. Privatization of ENEL, the national, vertically integrated, state owned electricity utility, is planned to start in 1997, and a final decision about the degree of vertical and horizontal integration is expected shortly. A Regulatory Authority has been created for the first time, a new price regulation mechanism (price-cap) will be adopted, and new concessions and contracts will be issued. Municipal utilities are also undergoing changes in ownership and a strong debate is underway as to the price to be paid to IPPs. No one yet knows in detail what the future structure will look like or how long the evolution from the present structure will take. In this paper, we rely on emerging trends to speculate on some of the possible transition and end-states for this evolution. We first consider whether additional promotion of energy efficiency and renewable energy would be warranted in any of these states. We then describe the incentives and disincentives for energy efficiency and renewable energy programs that would be created in each of these states. Finally on the basis of these considerations we propose, where appropriate, additional public policies to promote energy efficiency and renewable energy development in the evolving Italian power sector.