
Breadcrumbs
Gas-reliant Italy lags behind in Europe's race to renewables
Analysis by energy think tanks Ember and ECCO finds that Italy is lagging far behind other major European economies in decarbonising its electricity sector.
About
Italy is lagging far behind other major European economies in decarbonising its electricity sector.
Executive summary
Key findings
Michele Governatori Energy Programme Lead, ECCO
Relying on power security solely from thermal plants is putting affordability and decarbonisation of the Italian energy system at risk. Unlocking new RES, integrating demand response in the balancing services, and activating dynamic power pricing are urgent tools for transition.
Clean power is a hallmark of a credible Net Zero plan
A consensus emerges among Italy's peers
Source: Ember 2021, Zero-Carbon Power
How does Italy match up?
Italy is lagging behind in decarbonising its electricity
Italy is lagging far behind other major EU economies when it comes to taking action to fully decarbonise the EU electricity system by 2035 and align with 1.5°C.
Enel, Italy’s largest power utility (and the world’s second largest), recently announced a 2040 fossil gas phase-out, ten years ahead of schedule. This is a clear signal that it recognises the future lies in greater electrification powered by renewables.
However, the Italian capacity mechanism, funded by public money, is enabling utilities to invest in new CCGT baseload plants from 2024 to 2040 due to payments of up to €70 / kW / per annum. These payments distort the market in favour of potentially uneconomic gas plants to the detriment of renewables and other clean energy solutions such as storage, demand side flexibility etc. The next round of capacity auctions will be held by Terna, the Italian transmission system operator (TSO), on 21 February 2022 for delivery from 2024.
Italy exposed to fossil electricity price shocks
Dependence on fossil gas leaves Italy vulnerable
The recent energy crisis, driven by soaring gas prices, has confirmed the substantial economic and political risks associated with a continued reliance on imported fossil gas.
As the energy crisis shows no signs of abating, there has never been a more urgent time to accelerate the transition to clean power.
Conclusion
Recommendations
Increased deployment of renewables combined with robust energy efficiency policies are the only ways to reduce Italy’s dependence on gas.
- Italy could and should be playing a much more significant role in achieving the decarbonisation of the EU power sector through the adoption of a 2035 clean power commitment.
- Italy needs to remove the existing economic and structural barriers to the accelerated deployment of new renewable energy sources, particularly wind and solar.
- There should be much more ambitious renewable electricity generation targets in Italy’s revised NECP due in 2023.
- Italy should reduce to zero the amount of new thermal capacity procured in the next capacity market auction.
- The Italian TSO, in coordination with the DSOs and with the regulator’s lead, should immediately start a program of dynamic power pricing and effective integration of demand response in the ancillary services market.