How Solar Subsidies Can Distort the Power Market: The Case of Italy
European Energy Review, 5 July 2012
Posted: 29 Oct 2013
Date Written: July 5, 2012
Italian policies to stimulate power production have been a success in the sense that solar power capacity has exploded, but they have also led to formidable costs. What is more, argues Carlo Stagnaro of the Italian think tank Istituto Bruno Leoni, support for green power has profoundly distorted the functioning of the Italian energy market. As solar power is subsidized and given unlimited priority access to the grid, the size of the "contestable market", where power producers compete with each other, has shrunk dramatically. Stagnaro warns that the measures now being discussed to remedy the problems will put further pressure on the market model in Italy and lead to more control from above.
Keywords: solar power, renewables, subsidies, power market, competition
JEL Classification: D40, D62, H20, L51, L94
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