The experience of Italy and the US with exceptional regulatory incentives for exceptional electricity transmission investments

Abstract

There is a trend in regulatory practice towards exceptional incentives for exceptional investments. Italy and the US have the longest experience with a regulatory framework for strategically important investments that deviates from the default framework. In these countries, the incentives provided to the project promoter are based on a case-by-case assessment of the project. Policy makers and regulatory authorities in countries that are considering setting up such a framework can learn from these experiences. In this paper, we therefore analyze them in detail. We find that the Italian scheme is simpler, which reduces the administration costs. The US scheme is more advanced in the case-by-case assessment of the requested incentives. However, both schemes have evolved, each becoming more sophisticated and complex. Countries that are considering the introduction of exceptional regulatory incentives for exceptional electricity transmission investments should note that this is a process that will require fine-tuning.