Measuring the Impact of Independent Regulatory Agencies on the Decarbonization of the EU Energy Mix

Abstract

National Regulatory Agencies (NRAs) have a key role in the decarbonization of the European electric systems, as they may facilitate or constrain its transformation through the organization of wholesale electric markets. However, regulators face limitations in achieving this central objective set by the Union and its Member-States by the governance regime that was initially designed to in the aim of supporting the liberalization and the integration of the EU single market, in particular to benefit to (individual and professional) customers. NRAs original mandate is to support competition, guarantee market stability and set pricing mechanisms for efficient allocation of resources. NLP methods are relied upon to characterize the “regulatory governance regime” in each Member State, highlighting three main dimensions. Then, panel data analysis aims at measuring the impact of regulatory governance characteristics on the evolution of the share of renewable energy between 2013 and 2018 in EU member states. The results show that independence of the regulator is negatively correlated with the share of renewable energy, and transparency is negatively correlated with industrial tariffs. Results are then put in context to discuss the role of NRAs given the challenge of decarbonization or the EU energy mix by 2050.