The Misguided Quest for Regulatory Stability in the Renewable Energy Sector

Regulatory stability is usually identified as the key factor to attract investments in any sector. In the energy sector, the exceptional level and pace of investments required by the transition towards the low-carbon economy have led to an almost exclusive focus on measures which could increase regulatory stability. This article argues that both the goal of regulatory stability and the means to obtain it are badly in need of clarification. A case study of renewable energy regulation in Italy shows that regulatory stability cannot be equated with a ban on retrospective regulatory intervention. Moreover, neither national nor international litigation on retrospective cuts to renewable energy supports schemes help improve the quality of regulation. What is needed is a range of procedural and substantive regulatory measures allowing states to credibly commit to a long-term strategy for renewable energy. In the European Union (EU), procedural measures hinge on the new National Energy and Climate Plans, to be adopted in the framework of EU governance, and on regional cooperation on targets and support schemes. The substantive measures include innovative financial instruments and alternative ways to manage disputes.