Monica Giulietti: CERRE Research Fellow and Expert in Energy Economics and Regulation
Each month CERRE introduces a member of its academic team showcasing their background, introducing the ongoing projects they are working on, and addressing topical cross-cutting issues everyone wants to know about.
Hello Monica, thank you for chatting with us today. Maybe you could start by telling us a little about your academic background and research expertise.
I am an economist by training and have been interested in the areas of competition policy and regulation since the beginning of my academic career in the mid-1990s. I have been studying energy markets for 25 years, following the developments of different markets as a result of the liberalisation process. I have worked mainly on issues related to retail market competition, consumer behaviour and fuel poverty.
In recent years I have broadened my horizon and studied decentralised energy markets, local networks and the role of energy storage in energy systems with high penetration of renewable generation. The features and implication of the European legislation of the energy sector have been central to my research activities for many years.
What has your previous research at CERRE focused on?
My recent work at CERRE has been developed in collaboration with Karim Anaya and Michael Pollitt. Our project on the future of Distribution System Operators (DSO) sought to shed light on the nature of optimal regulation of the electricity DSO over the period to 2025 and beyond, following the implementation of the EU Clean Energy Package. Our research work as part of the project allowed us to explore how six European countries were supporting the transition to a more active DSO. We also presented several examples of recent and ongoing projects relating to the role of the DSO in the energy transition.
We furthermore identified a few scenarios relating to how existing European legislation is facilitating a more active role for the DSO. The research work undertaken for this project allowed us to identify several innovative projects involving an active role for DSOs which had been developed across Europe, but these were not well known outside their jurisdiction.
You are working on a new follow-up DSO project for CERRE with fellow academic Michael Pollitt that shifts the focus to a more local level. Could you explain what you’re looking into?
Building on our previous investigation about the future of DSOs, our most recent project is currently being developed in collaboration with Andrei Covatariu, Daniel Duma and Michael Pollitt. In the new study, we build on the previously identified areas of potential DSO activity but shifted the focus to a more local level.
The aim of the project is to learn from DSO experience and leading jurisdictions on how electricity and gas DSOs can work with national/local governments to become more active in the energy transition, via promoting system integration between renewable electricity, transport, gas and heating networks. The research project involves an international comparison of the experience of active DSO engagement in local energy systems in Europe, based on a survey of European electricity and gas DSOs. The project also involves the analysis of several case studies in jurisdictions within and outside Europe.
What is your assessment of the current impact of high-energy prices on consumers and retail markets? Have the measures put in place to protect European citizens proven worthwhile?
Different approaches have been taken by different countries in the short term to limit the unexpected hikes in energy bills, with more or less extensive interventions in the operations of markets. There is a good degree of consensus among economists about the fact that the policy interventions should be aimed at supporting vulnerable consumers rather than limiting the normal functioning of energy markets. In the long term, however, the most effective interventions are likely to be related to the promotion of energy efficiency in buildings and transportation. These will require a concerted effort by policy makers at the European, national and local level, in order to promote changes in traditional business models and in consumer behaviour.
What other work are you involved in on this issue of consumers?
My current work focuses on the distributional effects of recent changes in energy prices in the UK. More broadly I am interested in the problem of affordability of the measures required to reduce Western economies’ exposure to price volatility and to achieve the net-zero objectives to which several countries committed. Concerns are indeed growing in several European countries about the social and economic implications of recent increases in the level and volatility of energy prices, raising questions about how governments and other actors might mitigate their impact.
Moreover, growing calls for a ‘just transition’ require that the costs and disruptions of the transition to net-zero are allocated ‘fairly’ across economic and social groups. For many vulnerable households, the required investment in new technology is likely to be unaffordable and as a result, a trade-off might emerge between the pursuit of environmental and social policy objectives.
Looking to the future, what’s next for EU-wide regulation in the energy sector?
The recently introduced Gas Package has set the legal and regulatory foundations for a European green transition characterised by an effective system integration to achieve ambitious environmental objectives. The tools and measures put forward in the Gas Package have recently been strengthened and extended in the REPowerEU plan, aimed at reducing member States’ dependence on external sources of fossil fuel. The REPowerEU plan also sets ambitious goals to fast forward the European green transition.
In my view, future changes in the European regulation of the energy sector involve a more precise definition and implementation of these ambitious plans via a new set of incentives and regulatory interventions. These plans not only require a faster development and deployment of energy generation from renewable sources, but also the promotion of a more effective system integration and the creation of more flexible markets at the European, national and local level. The recent CERRE project looking at energy market design is starting to address these challenges which are going to be critical for a successful implementation of EU regulation in the energy sector in the near future.
Thank you so much for your time and detailed explanation, Monica.
Monica Giulietti is a Professor of Microeconomics at the University of Loughborough’s School of Business and Economics, where she heads the Economics Discipline Group focusing primarily on energy economics and regulation.