Regulating by uncertainties the energy sector in the deepest (ever) transformation, while fostering future-proof investments

Abstract

This paper brings into the picture the perspective of the energy regulator. It casts light on the challenges associatsed with the task of guaranteeing a number of medium-to-long-term objectives such as an adequate flow of investment in infrastructure, development of well-functioning markets, and a balance between private profit and the general interest. In particular, the paper addresses the concern of fostering long-lasting, “future-proof” investment in a sector that has been characterised by intense technological change and fast-changing market conditions- both sources of major uncertainty as to the effects that regulatory decisions will have on future developments within the sector. Drawing on the author’s personal former experience as president of the Italian regulatory agency from 2011 to 2018, the paper illustrates and assesses past regulatory action with reference to (i) reform of the gas market, (ii) adoption of a new generation of smart meters, (iii) reform of the electricity retail market, (iv) and integration of RES into the electricity market. The review illuminates the multifaceted circumstances that have fostered-or hindered-successful forward-looking regulation.