White Certificates in the Italian Energy Oligopoly Market

Abstract

Abstract:In this paper we deviate from neoclassical assumptions of fully competitive energy markets, and represent a more realistic oligopolistic market, given the reconsolidation tendencies of energy companies. We focus on policies for energy efficiency improvement for electricity suppliers, namely on White Certificates. The behaviour of each supplier is based on a detailed decision tree, which determines the optimal move given the expectation on the competitor's behaviour. According to our preliminary findings, the introduction of white certificate obligations should encompass larger increases in the electricity prices. In order to test our theoretical findings we make use of a typical oligopolistic market in Italy, where we depict that a leader company can serve the main part of electricity and energy efficiency projects, through financing them with White Certificates, while the residual demand is more expensive and must be covered at a high cost from follower companies.

Market-Based Instruments to Promote Energy Efficiency: Insights from the Italian Case

“…For example, in Directive 32/2006, the European Commission included white certificates as one of the tools that member states may use to achieve EE goals. In addition, the Italian scheme was introduced in January 2005 to implement the EU Directive on liberalizing the electricity and natural gas markets [20].…”

Assessing drivers of energy consumption and progress toward energy targets in Italy

“…In the 2018 State of Energy Efficiency Report of the American Council for an Energy-Efficient Economy (Berg et al 2018), which evaluated the energy efficiency policies and performance of the world's top energy-consuming countries using 36 metrics spread over four categories (buildings, industry, transportation, and overall national energy efficiency), Italy, together with Germany, is ranked first. Additionally, the main Italian energy efficiency policy measures, namely, the White Certificate and tax deduction schemes, are often mentioned as best practices at the EU and international levels (IEA 2018;Trotta et al 2018;European Commission 2017;Tromop 2017;Oikonomou et al 2012) because of their ability to promote both easy and complex projects (Association Technique Energie Environnement 2015) and to spread the culture of energy efficiency at local levels (IEA 2014). In addition to market-based instruments, the 2018 IEA's integrated metric -the 'Efficiency Policy Progress Index' -indicates that in recent years, Italy has registered significant increases in the coverage and strength of mandatory energy efficiency policies (IEA 2018).…”