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The liberalization of electricity markets has been dominated by conditions of oligopoly and market power, as shown in numerous studies in empirical literature on the supply side. However, regulators have used statistical measurements to monitor the extent of market power, making little reference to founded theoretical approaches. This paper provides a new contribution to the literature on the electricity market by presenting a theoretical and empirical model to construct competitive equilibrium, and estimating market power on both the supply and demand side of the day-ahead electricity market. We implement an accurate measurement of the welfare loss associated with non-competitive market conditions, based on ex-ante demand and supply behavior.This model provides a useful analytical tool for regulators and policy-makers in order to implement pro-competitive regulation. We perform an empirical simulation to show the effects of non-competitive equilibria on the Italian hourly markets over the period 2013–2014. In an ideal competitive market, prices would be lower than historical prices by about 2–5% and quantities would be higher by about 0.5–1%.

The notion of energy security in most interpretations includes the physical supply and price affordability components, making financial risks a crucial part of energy security strategies. Mainstrea...

The Italian electricity market was characterized by a remarkable decrease in demand during the COVID-19 lockdown (10 March to 2 June 2020). There were also negative peaks of over 50% and record low prices of about 20 Euro/MW. This paper aims to investigate the exercise of market power in the Italian power exchange during the pandemic, explicitly considering transmission line congestion, and disentangling the measure of the unilateral market power from congestion rent and re-dispatching costs. We computed the Zonal Lerner Index for every hour in January–June 2020 for the main operators on the supply and the demand side in the Italian day-ahead market. Furthermore, we analyzed the correlation between market power, congestion, and the effect of COVID-19. The results showed that the exercise of market power on the supply (mark-up) and demand (mark-down) sides were considerably weakened during peak hours by massive demand reduction. However, it was surprisingly reinforced during emergency periods in specific off-peak hours. Overall, the main players have somehow increased the intensity of market power during the COVID-19 pandemic crisis, which calls for more pro-competitive action by the regulatory authority and paying more attention to heterogeneous players’ behaviors.

Editorial Note

This study aims to investigate the determinants of short- and long-run investment behavior in Saudi Arabia for eight non-oil sectors. Saudi Arabia is currently proceeding with its historic Vision 2030 reform plan, which aims to significantly increase the private sector’s contribution to the country’s gross domestic product. Thus, analyzing investments at the sectoral level is important for Saudi Arabia. Such an analysis can provide policymakers with a deeper understanding of potential opportunities for boosting private sector growth.

We estimate a micro-founded life-cycle consumption model for Saudi Arabia over the period 1970–2017 using error correction model procedures. Dynamic adjustments are significant, and both in...

The diffusion of renewable energy sources (RES) is a fundamental objective of the worldwide policy actions for sustainable development, at the UN level with the sustainable development goals (SDG) recommendations, to ensure access to affordable, reliable, sustainable and modern energy for all (SDG 7). Also, primary attention to RES has been given at the EU level with the new Green Deal and the new objectives of the Next Generation EU after the Covid pandemic, and at the level of national Governments worldwide. So far, there has not been an analysis of the RES convergence process across countries worldwide, given that the issue of climate change is a global externality. Previous analyses have focused on specific regions, such as EU, OECD, provinces of China. This paper fills this gap, providing new evidence on the convergence process of RES for the 176 countries that account for more than 98% of the world population, from 1990 to 2018. A common panel data set has been used to take into account countries' specific effects. Several socio-economics and political variables are introduced to test conditional convergence such as openness to trade, developments in financial markets, income distribution, level of education. The results of this new contribution reveal that there is evidence of sigma-absolute and conditional beta-convergence process for several groups of countries. Moreover, the conditional convergence analysis shows that spatial spillover effects exert rich and complex impact on convergence speed. Finally, we provide policy recommendations, highlighting that the decarbonization target in 2050 needs additional mobilization of public and private resources to pursue a common, convergence path worldwide.

This paper provides new evidence on the convergence process of energy, water and food per capita consumption levels for 108 countries from 1971 to 2018, using a common data set, with VAR and panel data approach. We establish a new notion of multivariate sigma and beta-convergence. The results reveal that there is evidence of sigma- absolute beta- and conditional beta-convergence process for the countries. Moreover, the multivariate approach reveals that there are spillover effects with complex positive impact of each variable on the others in the analyzed countries. The speed of convergence is simulated to assess when the desired levels according to the prescription of the SDG of per water, energy and food capita consumption is reached by each country. Results have important policy implications for interventions on macro variables. Investment has a positive accelerating effect on water convergence. In addition, investment, openness to foreign trade and inflow of foreign direct investment have a positive accelerating effect on food convergence as well as on energy convergence.

The diffusion of renewable energy sources (RES) is a fundamental objective of the worldwide policy actions for sustainable development, at the UN level with the sustainable development goals (SDG) recommendations, to ensure access to affordable, reliable, sustainable and modern energy for all (SDG 7). Also, primary attention to RES has been given at the EU level with the new Green Deal and the new objectives of the Next Generation EU after the Covid pandemic, and at the level of national Governments worldwide. So far, there has not been an analysis of the RES convergence process across countries worldwide, given that the issue of climate change is a global externality. Previous analyses have focused on specific regions, such as EU, OECD, provinces of China. This paper fills this gap providing new evidence on the convergence process of RES for 176 countries that account for more than 98% of the world population, from 1990 to 2015. A common panel data set has been used taking into account countries’ specific effects. Several socio-economics and political variables are introduced to test conditional convergence such as openness to trade, developments of financial markets, income distribution, level of education. The results of this new contribution reveal that there is evidence of sigma- absolute and conditional beta-convergence process for several groups of countries. Moreover, the conditional convergence analysis shows that spatial spillover effects exert rich and complex impact on convergence speed. Finally, to provide policy recommendations, we simulate alternative scenarios to assess when the target levels of RES can be reached worldwide.

Despite the increasing attention paid to energy security and the continuously broadening scope of the field, the perspective of energy importing countries (i.e., supply security) has overshadowed that of exporters, who seek to ensure demand security. As official statements and policy documents illustrate, major energy exporters and relevant international organizations realize the significance of energy demand security for their economies and global markets.

Purpose China is a major energy import powerhouse, its trade deals have significant impact on international energy trade and global energy markets. The purpose of this paper is to explore the role of energy in China’s preferential trade agreements (PTAs) and their impact on Chinese imports of oil, gas and coal. Design/methodology/approach An extended trade gravity model framework is applied to explore the dynamics of China’s annualized energy import flows from the 22 economies that have PTAs with it for the period 1995–2015. Findings The effect of PTAs on trade patterns varies across the product groups and agreement clauses. The dominant factor affecting trade flows of coal, crude oil and oil products is the average tariff level. Its impact is less significant for gas imports, which are more affected by policy arrangements represented by a PTA variable. The depth and scope of a PTA do not affect Chinese energy imports patterns. Research limitations/implications This paper is focused on exploring the effect of China’s trade and foreign relations strategies on its energy imports through the prism of its PTAs. Estimating the direct impact of China’s initiatives in the areas of trade, investment, security, culture, etc., on its trade flows of energy products and other product groups using the methodological framework proposed in this study would contribute to better understanding of the issue. Practical implications The findings can assist both China and energy exporting countries that target Chinese market in better understanding the drivers of trade flows of energy products and design their PTA strategies accordingly. Originality/value This study applies the trade gravity model framework to assess the impact of specific components of preferential trade agreements – tariff reduction and depth and scope of agreement – on energy trade flows differentiated by product group.

Solar photovoltaic systems installed on homes and commercial building rooftops are deemed central for a low-carbon future. As capital costs of photovoltaics continue to fall, its role towards making buildings more sustainable and environmentally-friendly will continue to grow. Capital costs of a photovoltaic system comprise the module and balance-of-system costs. The latter refers to everything-else needed to make the photovoltaic system functional including cables, mounts, labor, etc. While modules are priced internationally, the balance-of-system cost is country-specific. Price developments of modules, which have been thoroughly studied in literature, followed an 80% learning curve. Research on the balance-of-system learning curve however, has not been as extensive. In this paper, we estimate for the first time the learning curve of balance-of-system costs in photovoltaics for more than 20 countries via an extensive dataset. Our calculations yield a global learning curve for the balance-of-system of 89%, which corresponds to a progress ratio of 11% compared with 20% for modules. Understanding the rate at which capital costs of photovoltaics are falling with such detail will aid in more effective renewable energy policy planning and budgeting. Finally, some steps requiring no financial commitment but can bring down balance-of-system costs are discussed, which greatly contribute to a cleaner and more sustainable future.

Addressing environmental problems requires large-scale transition efforts in the transport sector. Many governments, encouraging sustainable mobility, see alternative fuel vehicles as an important part of a technology portfolio targeted at reducing polluting emissions. However, consumers' adoption of alternative fuel vehicles is hindered by complex technical and socio-economic aspects. The novelty of this study is to explicitly explore the impact of age on consumers' attitudes towards alternative fuel vehicles with an original questionnaire survey, targeting a sample of high-educated Italian consumers. We identify the main concerns related to alternative fuel vehicles and suggest measures to overcome these concerns. A better understanding of the effects of different ages on attitude processes is crucial for designing more effective private and public strategies for alternative fuel vehicles' development across a variety of consumers.

One major avenue for policymakers to meet climate targets is by decarbonizing the power sector, one component of which is raising the share of renewable energy sources (renewables) in electricity generation. However, promoting renewables --in liberalized power markets-- creates a paradox in that successful penetration of renewables could fall victim to its own success. With the current market architecture, future deployment of renewable energy will necessarily be more costly and less scalable. Moreover, transition towards a full 100% renewable electricity sector is unattainable. Paradoxically, in order for renewable technologies to continue growing their market share, they need to co-exist with fossil fuel technologies. Ignoring these findings can slow adoption and increase the costs of deploying new renewable technologies. This paper spots the incompatibility between electricity liberalization and renewable policy, regardless of the country, location or renewable technologies. The Paradox holds as long as market clear prices with short term marginal costs, and renewable technology's marginal cost is close to zero and not dispatchable.

The aim of this paper is to analyze the main determinants of the economic acceptability of four Green Technologies (GTs): alternative fuel vehicles, energy savings in residential buildings, smart meters and renewable electricity, using a meta-analysis on a sample of 35 selected papers, which provided 245 primary data. This approach allows detecting relationships across heterogeneous studies, avoiding the subjectivity of qualitative surveys. We implement a new two-step procedure. First, we compute a measure of the implicit price for a kilogram of CO2 avoided (PCO2), homogenizing the usable information for the GTs considered. Second, we conduct a meta-regression using the computed PCO2 values to estimate the socio-economic determinants' impact. In general, our results show a wide degree of acceptability for GTs which is stronger among European citizens. In particular, it emerges that, on average, the estimated PCO2 is positive for the GTs considered, and additional positive effects exist when respondents are confronted with an explicit reference to quantitative targets in terms of CO2 abatement, a clear proposal for payment timing, and a specific renewable electricity mix. These results indicate that information and transparency are crucial to spur GTs deployment. Therefore, to support GTs’ market penetration, public and private institutional stakeholders, have to provide “ad hoc” information to the end users, setting a clear and suitable system of prices to increase the economic value end users place on GTs.

In the electricity market, sudden price jumps occur more frequently than in other markets due to the peculiarity of electricity. Furthermore, the structural spot characteristics of the electricity market determine high price variability. All these characteristics have been accentuated by the dramatic increase of renewable energy supply in Italy starting in 2010. These features suggest the possibility of contagion effects across Italian regional electricity markets, considering contagion such as a sudden and significant increase in cross-market links arising from a shock to a specific market. In this paper we investigate whether such a renewable energy increase has affected the contagion behavior in the Italian electricity spot market taking into account both the difference between interdependence and contagion and the direction of the shock. We find empirical evidence, with significant tests, that no changes have occurred in interdependence mechanism, nor in contagion effects due to renewable energy sources development in Italy.

The concept of energy security has been recently extended to encompass not only the concept of physical supply availability or concerns about the lack of, but also new aspects related to price stability and affordability. Energy security is viewed, in a financial perspective, as a concept of economic convenience of energy supplies, available from a portfolio of partner countries. This paper analyzes the oil imports structure of four major Asian energy importers: China, Japan, Korea and Taiwan. We measure the total and bilateral volatility spillovers of the portfolio risk associated with the composition of the main oil suppliers, using forecast-error variance decompositions derived from a vector autoregressive model. Results show that the composition of oil import composition determines varying risk levels for given oil import growth rates and average import prices and before and after the Financial Crisis of 2008. We simulate two shocks: Covid-19 Scenario and Increased imports from KSA, showing that risk increases within a 3–15% range. As expected, spillover effects are increasing and exhibit a consistent reallocation effects, confirming that a deep shock can modify the quality composition of the variance and not only its level.

The class of flexible functional forms for the utility and cost function has been characterized by the pioneering work of Gorman (Some Engel curves. In: Deaton A (ed) Essays in the theory and measurement of consumer behaviour. Cambridge Univ. Press, Cambridge, 1981), known as the Gorman polar form. Despite several decades have elapsed, the economic literature has not found the most general functional form that satisfies Gorman’s theorem. This note provides a new general theoretical and parametric formulation of demand functions, labeled general expenditure system (GES), satisfying the Gorman requirement that the Engel curve cannot exceed a polynomial of third degree in expenditure. Estimates show that the GES is a significant generalization of previous popular flexible functions.

This research is part of a joint project between the Saudi Arabian Monetary Authority (SAMA) and the King Abdullah Petroleum Studies and Research Center (KAPSARC). This paper estimates a micro-based life cycle consumption model for Saudi Arabia over the period 1970-2017 The estimate of consumption behavior in this paper is identified as centering on the income effect and the wealth effect: The income effect is defined as the direct impact on consumption of a variation in income. The wealth effect is defined as a consumer’s perception of a change in his or her wealth and a concomitant decision either to liquidate some of that wealth to enable an increase in consumption (in the case of a positive wealth change) or to decrease consumption in order to restore the consumer’s desired level of wealth (in the case of a negative wealth change). The wealth effect on consumption can be substantially different from the income effect because it is more closely related to consumers’ expectations of, and fluctuations in, the value of real and financial assets. The authors’ estimation shows that both income and wealth have significant effects on household consumption in Saudi Arabia, with a long-run marginal propensity to consume (MPC) out of income of around 0.73-0.95, and out of wealth of around 0.06. The sensitivity of consumption to income and wealth in Saudi Arabia appears to be consistent with the growth of the Saudi economy.

In 2014, the European Commission proposed a new renewable energy sources (RES) target in energy consumption by 2030 “to be delivered collectively” by the European Union as a whole, leaving unresolved the question of allocation among member countries. The aim of this paper is to propose and simulate a model of coordinated action among member countries based on two pillars, RES national binding targets and a quantitative cost minimization procedure based on a general translog function. We have considered RES national targets in three sectors: electricity, heating and cooling, transport. RES costs are differentiated according to learning-by-doing and RES productivity diffusion processes at the various RES production sites in the European Union. Three different scenarios are simulated and compared with the baseline case constituted by the 2020 cumulative RES target. The results show that, compared with the baseline, the costs of achieving RES binding targets, with the proposed decision process, can be reduced by up to 13% by 2030. These cost evaluations indicate that it is more efficient to produce RES in those countries that face lower technology costs, according to the comparative advantages of their territorial localization and the importance of the initial RES policy efforts.

We investigate whether there might exist some relationship between exercise of demand market power and renewable energy sources, in the Italian day ahead electricity market, using ex ante individual bids, in 2010–2011. We choose this period because we deem that is the initial period of booming renewable energy sources in Italy. We measure market power with the inverse of the hourly residual supply elasticity. Usage of bid data is a novelty in the literature, as previous studies have used ex post-market data. We consider the five main operators and we demonstrate that there exists demand market power, which can be empirically measured on average about 3–5% (statistically significant) in 2010, and higher, about 5–6%, in the 2011. As regard of the hours, we can find that the oligopsony market power is higher during daily hours than in the nightly hours. We show that this effect is significantly more pronounced during periods when there is abundance of renewable supply in the market.

This research paper compares the relative welfare impact of different options for allocating the financing burden of climate change mitigation policies. Focusing on efficient ways to finance policies aimed at climate change mitigation, not only at direct carbon reduction, could delink the issue of carbon taxation from carbon emissions. A Pigouvian tax is the traditional way of correcting for negative externalities, or the undesirable consequences for society arising from the actions of a company or industry sector, by levying additional taxes on that activity. Pigouvian taxation corrects society’s welfare loss, however, from the viewpoint of the private sector, such taxation imposes a deadweight economic loss with respect to the original private equilibrium. As an alternative, we evaluate a methodology that could fund investments to reduce carbon dioxide (CO2) emissions, and we show that the policy we consider to be optimal from a tax standpoint – Ramsey pricing can both improve world welfare and be politically more acceptable than other pricing options. Rather than focus directly on emissions reduction by taxing energy, a Ramsey pricing solution can be designed to minimize distortions while raising funds for investment in climate change mitigation.

Recent literature has shown that electricity demand elasticities may not be constant over time and this has investigated using time-varying estimation methods. As accurate modeling of electricity demand is very important in Azerbaijan, which is a transitional country facing significant change in its economic outlook, we analyze whether the response of electricity demand to income and price is varying over time in this economy. We employed the Time-Varying Coefficient cointegration approach, a cutting-edge time-varying estimation method. We find evidence that income elasticity demonstrates sizeable variation for the period of investigation ranging from 0.48% to 0.56%. The study has some useful policy implications related to the income and price aspects of the electricity consumption in Azerbaijan.

This paper aims to measure the impact of the gradual adoption of Renewable Energy Sources (RES) on the welfare of consumers. To this end, we construct a theoretically founded measure of the true cost of living (TCL) and the equivalence scale (ES) for the household sector, based on a weather database of heating and cooling degree days. We estimate those values for 64 countries, which represent over two-thirds of the world population, according to World Bank statistics. We assume that the identified household in each country minimizes its expenditure on energy and other goods. We simulate alternate scenarios of renewables implementation in 2035, taking account of different RES prices, and assess the related societal implications of a gradual transition from fossil fuels to RES. The empirical results offer policymakers a basis for designing appropriate scenarios for the deployment of renewables, with the aim of fostering consumer welfare even in the context of international negotiations.

This paper builds a three-sector DSGE (Dynamic Stochastic General Equilibrium) model, considering explicitly the interactions among regular, underground and criminal sectors. We generated quarterly data for unobserved variables for Italian economy over the sample 1974:01–2011:02, through Monte Carlo simulations, and we found that underground economy is about 20 per cent of GDP, whereas criminal economy is 11 per cent. The dynamic behavior of the model shows that (1) regular production has a greater relative volatility with respect to unobserved production, (2) an efficient law enforcement activity is able to weaken unobserved activities and (3) unobserved sectors' variables exhibit a negative correlation with the corresponding ones of regular economy.

Over the last years the European Union (EU) has implemented ambitious climate and energy targets for 2020, i.e. the 2020 Climate and Energy Package (Package), to become a highly efficient, low carbon economy. The Package assigns binding renewable energy sources (RES) target for each EU member countries. Indeed costs to reach Package's targets vary among EU countries, given heterogeneity among regions and different instruments implemented to spur RES deployment. The aim of our paper is to provide a policy tool for EU policy makers in the negotiation process that assigns achievable quantitative targets according to which countries are not inclined to deviate from the agreement. We compute potential extra costs that may arise when some EU countries fail to reach the assigned objective within the Package with reference to RES target. More generally, our simulation model is an instrument that allows EU policy makers to assess incentives that countries might have to participate or not to the environmental agreements. Our analysis shows that partial participation to the Package produces inefficiencies by rising costs for other participating countries to the environmental agreement. Finally, we propose a new policy mechanism based on progressive sanctions for countries that do not meet their national targets, which are proportional to the monetary value of the penalty they impose to the rest of the EU countries with their opportunistic behavior.

In this paper, we analyse the financial viability and economic sustainability implications of government programs for the development of renewable energy sources, explicitly considering that consumers take environmental issues into account. We envisage a broad policy strategy for the future, which we label the “World Sustainable Scenario”, and we quantify the inter-temporal resource requirement in terms of investment necessary to achieve it. We perform an empirical meta-analysis to quantify the willingness to pay for green electricity worldwide. Subsequently, we compare the amount of resources required according to policy programs and the populations’ willingness to sacrifice current resources for future benefits ( i.e. , willingness to finance future investments) to assess the plausibility of current policies. The main empirical findings show that the population’s attitude toward green electricity will support, on average, 50% of the total investment required. We conclude that this is a positive result, which will make possible the success of the renewable energy sources development policy.

I analyze the new energy strategy approved by the Italian Government, the "National Energy Strategy: for a more competitive and sustainable energy". One of the SEN medium term targets is the equalization of Italian energy prices to the EU average within 2020. I argue that it is true that electricity market prices in Italy are effectively higher than in other EU Member States due to the fact that Italian generation mix is skewed toward expensive sources, like natural gas. However, system charges and taxes affect in a peculiar way households and industry final prices. In particular, I document that Italian industrial prices are higher than corresponding German price. However, Italian household prices are lower than corresponding German price. I set forth a new plausible proposal not considered in SEN, aimed at spurring competitiveness and growth of the Italian economy, adopting the relative electricity market prices structure similar to that registered in German market in 2012. I propose to shift electricity taxes and general system charges from Italian industry resulting in a 8% reduction of their final price, to Italian households resulting in a 24,5% increase of their final price. keeping the overall system of charges and taxes in monetary equilibrium. The macroeconomic effect of this policy on the Italian economy (using recently estimated elasticities for the Italian energy sector) will be the sum of the aggregate positive effect on industry and services, of about 2.2%, which constitute four fifths of total Italian value added plus the (smaller) negative effect on households spending of about -0.4%. The final effect can reach an order of magnitude of about 2% contribution to GDP growth. From a political viewpoint, this would also mean to make clear to the individual citizen that there exists a trade-off between a base scenario of paying less the electric bill and witness economic stagnation and unemployment and a more aggressive policy scenario of paying more the electric bill and witness some higher economic growth and lower unemployment.

Liberalization in the electricity markets has been characterized by oligopoly conditions and exercise of market power, largely studied in the empirical literature on the supply side. This paper provides a new contribution to the literature on the electricity market presenting a theoretical and empirical model to construct a competitive equilibrium, estimating market power both on the supply and demand side of the day-ahead electricity market. This model provides a useful analysis tool for the policy-maker to implement pro-competitive regulation, explicitly measuring the welfare loss associated with non-competitive market conditions. Results show the effect of non-competitive equilibria for the hourly markets in the period 2013-2014. In an ideal competitive market, prices would be lower than historical prices by about 2-5% and quantities would be higher by about 0.5-1%.

Following the abandonment of nuclear power with a post-Chernobyl referendum, Italian energy policy has created a culture in favor of renewables developed by entrepreneurs and paid for by end users in the form of subsidies. This has led to the success in Italy of incentives for the use of renewables, which in 2015 already met targets set for 2020. Focusing on the Italian case, this chapter initially describes the legal framework and, in particular, the incentive mechanisms and then analyzes the impact of renewables in the vertically integrated Italian electricity market with policy implications. The main results highlight that the massive spread of renewable energy sources (RES) has changed the attitude of policymakers from a command-and-control system to a more simplified and market-oriented approach. In particular, given the past intensive financial efforts, new legislation started to curb new RES investment by setting clear caps on the total financing allotments to the incentive policy. Furthermore, the massive injection of RESs has highlighted the inadequacy of the current electric market design. Finally, the large-scale penetration of RES into everyday life in Italy has increased consumer awareness of green electricity, stimulating a new quest for green electricity and better climate conditions.

The energy journal 37(SI2), (2016). doi:10.5547/01956574.37.SI2.cbol special issue: "Special Issue on "High Shares of Renewable Energy Sources and Electricity Market Reform"", Published by IAEE, Cleveland, Ohio

This study analyzes the attitude of Italian youngsters toward the adoption of alternative fuel vehicles (AFVs), using the fuzzy-set qualitative comparative analysis. An internet and face-to face questionnaire survey collects the intensity of knowledge, perceptions, and attitudes toward alternative fuel vehicles of Italian university students. A survey among youngster allows understanding the view of the future generation regarding alternative fuel vehicles technologies. The findings from the survey (n = 330) indicate the relevant determinants that spur the purchase of alternative fuel vehicles, the type of technology preferred among such vehicles, the specific related environmental benefits and the related barriers that youngsters perceive. Consumers' acceptance is crucial in the development of AFVs. This article also includes practical implications for both policymakers and manufacturers.

The electrical system is experiencing many challenges, including the increasing use of renewable energy sources characterized by high variability, the need to take action to mitigate climate change, the need to restructure the aged infrastructure, and then the development of smart grids. New ways of interplay between consumers and producers have emerged, but their implications have not been fully analyzed. This article analyzes the most relevant barriers that are perceived by consumers as obstacles to the development of smart grids, using a literature review. Our findings indicate that there are four relevant barriers: costs, privacy, cyber security, and regulatory aspects. Consumers must be informed in a transparent and convincing way. Indeed, electricity consumers play a key role in the development of smart grid technologies, since they will play the crucial role in the future electricity market.

In this paper, we construct an optimal price design mechanism to determine the equilibrium in the day-ahead electricity market, specifically aimed at solving the uncomfortable conflict between conventional thermal sources (CTS) and renewable energy sources (RES). We find that the actual hourly market design is inadequate to achieve an efficient solution in the presence of a large and increasing share of RES. It is not conducive to catalyzing the correct price signal for future investments and does not take into account welfare considerations. Our proposal for a new market design is based on three main pillars. We state pro-competitive incentives to CTS participation in the market. We take into full account the opportunity cost of RES for society and propose correct price signals on the demand side through an optimal Ramsey pricing scheme. We show an empirical application to the Italian electricity market, using empirical measures of LCOE for RES and empirical estimation of heterogeneous buyers' behavior. The results show improvement in efficiency and welfare in the Italian electricity market with respect to the existing zonal market prices for suppliers and uniform price for buyers.

The Italian electricity market has been characterized by a remarkable increase of renewable energy source (RES) supply since 2010, which has determined relevant structural changes in the electric system. Noticeably, during favorable weather conditions, such as sunny or windy hours, increasing supply of RES generation exerts a downward pressure to the formation of the equilibrium price in the market and at the same time forces an increase in line congestion. The aim of this paper is to investigate whether such RES increase has affected the exercise of market power in the Italian Power Exchange (IPEX), explicitly considering transmission line congestion. We employ our approach to construct the residual demand curve and to disentangle the measure of the unilateral market power from the congestion rent. We compute the zonal Lerner index during the period 2009 to 2013 for the main generators in the Italian day-ahead market and we analyze the correlation among market power, congestion and RES supply. In particular, we investigate whether RES development has affected congestion and firm's strategic behavior, empirically testing whether structural changes have occurred in market power or in congestion rent. Our results show that the exercise of market power has been considerably weakened during peak hours by the massive competition of RES, but it has been surprisingly reinforced in specific off-peak hours, in the absence of solar RES and in specific zones, where congestion yields market splitting. These findings support pro-competitive market regulation and reform strategies, and shed light on the impact of RES and congestion on market outcomes.

In the new millennium two developments have dominated the international economic situation: the persistence of high oil price and, consequently, the worsening of the U.S. trade deficit. In this paper I argue that it is possible to set forth an alternative explanation of U.S. trade deficit mainly considering a possible microeconomics missing link, taking in account the “twin nature” of the U.S. trade deficit and conjecturing that U.S. trade deficit can be explained as the result of a convergence of the Chinese and U.S. long run interest, in order to obtain a less energy intensive long run growth. So, I set forth the idea that the U.S., as the future exporter of the New Clean Technology, is a very attractive feature for China and this is a possible answer to the question: “Why should China continue to accumulate dollar reserves?”

Talking about Europe means talking about all the reasons for its lack of coordination, market malfunctions, problems in the public sector, the banking sector and so on.