Purpose: The paper discusses energy saving policies implemented in Italy in the last ten years and shows their ineffectiveness in promoting innovation in new energy systems, such as Smart Grids.

The economic fundamentals involved in energy consumption are investigated with specific reference to high rise – high density settlements and their prevalent building typology, i.e. tall buildings. The paper discusses how the energy demand and consumption of a single building can affect the energy trade-off of entire cities.

Approach – We examine current local and national policies- for energy consumption reduction, then we discuss how Italian urban planning should adopt ad hoc regulation in order to pursue innovative systems of energy saving. We also - debate on the present absence of procedures to evaluate these policies’ effects on market demand in both new building construction and deep energy retrofit. Finally we argue the inadequacy of Italian national and local legislation in promoting Smart Grids as innovative systems of electric energy production, distribution and consumption.

Findings – We represent the stat of art in the Italian legislation for energy saving and we offer a theoretical framework to verify the effectiveness of these measures. Furthermore we propose a new way to promote innovative systems of energy production for high density settlements. In this respect, due to technological and facility management characteristics tall buildings are an opportunity to experiment smart grids at neighborhood level. Beyond the construction engineering advances, we present how regulation should help to improve innovation.

Research limitations/implications – The paper is mainly exploratory and identifies some issues for further research. Data on housing market demand related to public incentives must be collected to measure the effectiveness of local norms. Furthermore, selected case studies must be investigated to verify the energy demand at diverse urban density: this survey is preliminary to the definition of protocols for both technological and regulatory interventions.

Originality/values – The paper is the first attempt in Italy to present the role of town planning norms in the promotion of Smart Grids and, in general, to match innovative distributed energy systems to legislation in planning. Furthermore the present contribution highlights the potential of specific building typologies, e.g. tall buildings, in the promotion of Smart Grids.