A robust benchmarking of direct margin in Italy's energy retail markets.

In the 2000s, Italy liberalized its electricity and natural gas markets, and in 2016, it separated retail activities from other activities within these markets. Such differentiation is unique within Europe. Italy is an ideal case for investigating which operational factors may increase profit margins among electricity and gas retailers. The present analysis analyzes 120 retail operators in the Italian electricity and gas markets in 2020, using two models to assess their cost and commercial efficiencies in achieving high direct margin (defined as the difference between revenues and raw materials cost). The findings show a positive effect of size on efficiency. • We analyze the Italian electricity and natural gas retail market in 2020. • We develop two benchmarking models to investigate cost and commercial efficiencies. • We analyze which features bring advantages in achieving high margins to Italian retailers. • We find evidence of economies of scale. • A demand aggregator could provide high margins for small operators. [ABSTRACT FROM AUTHOR]