Italy Power Report Q2 2013 - New Report Available

With nuclear sources of energy no longer forming part of Italy's energy plan, and with the government ruling out shale gas due to the controversial extraction process, the authorities are turning to coal, gas and renewables in the national energy plan. With some of the highest electricity prices in Europe, Italy's government is aware that it will remain uncompetitive unless it drops tariffs, and one of the ways it aims to do this is by cutting spending on energy imports. A global rush for gas - encouraged by shale gas production in key markets - has also seen the price of coal fall, with Enel tapping into this opportunity for its domestic coal-fired power plants. The utility claims bills are falling as a result of this shift. However, despite these positive developments, the absence of details has generated concern. The government aims to boost renewables' share of the electricity mix, but offers little information about how it will do this.

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Gas-fired power plants account for the nearly half of Italy's electricity generation capacity, and this figure is unlikely to change over the course of our forecast period. However, these will not be fuelled by shale gas, with the government ruling out its extraction because of environmental and safety concerns. Italy has no nuclear power stations and following a referendum in mid-2011, Italians voted against turning to nuclear sources of power.

During the 2012-2022 period, Italy's overall power generation is expected to increase by an annual average of 1.5%, to reach 327.3 terawatt hours (TWh). Driving this growth is an annual 2.9% gain in gas-fired power. Coal-fired generation is expected to fall by 1.5% per annum, with the use of oil-fuelled generation to drop by an annual average of 13.1% over the period.

Following an estimated decrease in 2012 real GDP of 2.3%, BMI forecasts average annual growth of 1.0% between 2012 and 2022. Over the 2012-2022 period, the average annual growth rate for electricity demand is forecast to be 1.5%.

The key trends and developments in the Italian electricity market are:

* Enel announced in March 2013 that it is considering acquiring a stake of nearly 20% in the Trans- Adriatic Pipeline, which will bring gas from Azerbaijan to Europe in 2018. Enel aims to use this gas to fuel its gas-fired power stations.
* Enel reaffirmed its commitment to coal-fired power generation in Q113, announcing that it plans to procure coal from North America and Colombia - in the former, a shale-gas boom has increased the availability of coal - and with improvements to its Grazia Deledda Sulcis power plant on the island of Sardinia; here, Enel has signed a contract with ABB for an automation and supply control system.

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