Impacts of Electricity Subsidies Policy on Energy Transition

Energy subsidy programmes are socio-economically designed to offer a modern and affordable energy, accessible for specific social groups, protect domestic industry, simulate economic development and protect the environment. However, in several countries, energy subsidies have deviated from their objectives and become an energy budget burden and a sustainable development barrier. Many questions arise: what are exactly energy subsidies? How are they implemented in a country mechanism? And what are their real effects? This Chapter presents a review of energy subsidies: definitions, typologies, measurement approaches and effects. Facing harmful energy subsidies, reforms are also examined to help decision-makers phase out energy transition barriers related to subsidies. The case of the Tunisian power system is displayed in deeper details, characterised with a heavy burden of end-users electricity subsidies and an energy transition aiming 30% of renewable energies by 2030, against 3% in 2019. Using a holistic approach, based on hybrid energy systems modelling, has allowed presenting insights on reforming electricity subsidies and achieving sustainable development. This approach links subsidies, pricing, emissions, demand and supply of the power system through the advanced version of OSeMOSYS. Dynamics between energy, economics and environment are appealed within an integrated analysis of electricity subsidies policy.