OVERVIEW

The course provides the fundamental economic tools needed to understand public utilities and regulated energy markets. The first part introduces the analysis of natural monopoly, cost functions, economies of scale and the main forms of tariff regulation. The second part applies these concepts to the energy and electricity sector, analysing the organisation of the system, the functioning of European and Italian electricity markets, price formation, the role of regulatory authorities and the main challenges posed by the energy transition.

AIMS AND CONTENT

LEARNING OUTCOMES

The course aims to develop students’ ability to analyse sectors characterized by essential infrastructures, high fixed costs and natural monopoly. Students will acquire the tools needed to understand the rationale for regulatory intervention, evaluate the main forms of tariff regulation and interpret the functioning of energy markets, with particular attention to electricity markets, price formation and the effects of the transition towards renewable energy sources..

By the end of the course, students will be able to: 1. Understand the main economic issues related to the exploitation of natural resources, with a particular focus on exhaustible resources and the market failures that arise in such contexts. 2. Critically analyze the inefficiencies in energy markets, especially in the electricity and gas sectors, by identifying their structural and economic causes. 3. Assess the environmental and social impacts of energy resource use, integrating economic analysis with considerations of sustainability and collective responsibility. Apply the acquired knowledge to the specific case of energy markets, using energy as a key case study to explore complex regulatory, environmental, and economic challenges.

AIMS AND LEARNING OUTCOMES

Knowledge and Understanding

By the end of the course, students will have acquired knowledge of the main economic principles underlying public utilities and energy regulation. They will understand the concepts of natural monopoly, fixed costs, economies of scale and scope, market failures, tariff regulation and price discrimination. They will also know the basic structure of electricity markets, including generation, transmission, distribution, retail, dispatching, merit order, market clearing and the main components of final energy prices.

Applying Knowledge and Understanding

Students will be able to apply economic concepts to the analysis of regulated public utilities and energy markets. They will be able to interpret cost and demand conditions in natural monopolies, compare different tariff-setting rules, assess the effects of rate-of-return and price-cap regulation, and apply these tools to the electricity sector. They will also be able to explain how wholesale electricity prices are formed and how regulatory mechanisms affect firms, consumers and market outcomes.

Making Judgements

Students will develop the ability to critically assess the role of regulation in sectors characterized by high fixed costs, essential infrastructures and limited competition. They will be able to evaluate the advantages and limitations of different regulatory instruments, the trade-offs between efficiency, cost recovery, consumer protection and investment incentives, and the main challenges related to renewable energy integration, security of supply and the energy transition.

Communication Skills

Students will be able to use the basic terminology of public utility regulation and energy economics. They will be able to clearly explain the economic rationale for regulation, the functioning of electricity markets, the role of regulatory authorities and network operators, and the main issues related to tariff setting, price formation and energy transition.

Learning Skills

Students will acquire the conceptual tools needed to further study topics in regulation, industrial organisation and energy economics. They will be able to connect economic theory with real-world energy market issues, interpret basic regulatory and market information, and follow current debates on electricity prices, market design, renewable energy and consumer protection.

SYLLABUS/CONTENT

Programme

1. Non-competitive industries, fixed costs and cost functions.

2. Economies of scale, economies of scope and minimum efficient scale.

3. Natural monopoly and market failures.

4. Tariff setting in natural monopoly: marginal cost pricing, Ramsey pricing, Feldstein pricing and multi-part pricing.

5. Price discrimination and demand elasticity.

6. Peak-load pricing and optimal production capacity.

7. Rate-of-return regulation, price-cap regulation, auctions and the principal-agent problem.

8. Energy, electricity and the physical characteristics of electricity systems.

9. Generation, transmission, distribution, retail and dispatching.

10. European energy markets and the role of regulatory authorities.

11. Merit order, system marginal price, market clearing and pay-as-cleared mechanisms.

12. Italian electricity markets: day-ahead, intraday, daily products and dispatching services.

13. Final energy prices: energy component, network costs, dispatching costs, system charges and taxation.

14. Energy transition, renewables, intermittency, cannibalisation effect and new regulatory challenges.

TEACHERS AND EXAM BOARD

LESSONS

LESSONS START

2nd semester

Class schedule

The timetable for this course is available here: Portale EasyAcademy