LITTLETON, Colo., Sept 20 (Askume) – Italy’s electricity prices remain the highest among major European economies due to its long-standing reliance on fossil fuels for power generation, despite a rise in renewable energy generation.
Wholesale electricity prices in Italy have averaged around €100 per megawatt hour (MWh) so far into 2024, according to energy think tank Ember.
This compares with 69 euros in Germany and 50 euros in Spain, meaning Italian households and businesses pay much more for energy than in most other countries in Europe.
Fossil restoration
The high reliance on fossil fuel power generation is the main reason for Italy’s high electricity costs. Ember data shows that by 2023, 55% of Italy’s electricity will come from fossil fuels.
This compares with 45% in Germany, 39% in the UK, 25% in Spain and 41% across Europe.
So far in 2024, Italian power companies have successfully brought clean power generation to a new record and reduced the proportion of fossil fuels in power generation from 50% to 47% for the first time.
However, the share of fossil energy generation still exceeds that of rival economies, with the average fossil energy share of generation this year at 37% across Europe and 40% in Germany.
great and rising
Italy’s share of fossil fuel power generation is expected to increase over the remainder of the year as clean generation declines.
So far in 2024, Italy’s clean energy power generation growth is mainly driven by a 45% increase in dam power generation and an 18% increase in solar power generation.
Growth in hydropower and solar power led to a 20% increase in total clean energy generation from January to August 2023 compared to the same period in 2023, with wind power generation increasing by 2%.
Overall, Italy’s clean electricity generation reached a record 88 terawatt hours (TWh) between January and August, compared to 73.4 TWh in the same period in 2023.
However, in Italy both hydroelectric and solar power generation peak in the summer and then decline steadily over the rest of the year as snowmelt levels fall and solar generation reduces due to less sunlight.
This means that total clean electricity generation will also decline, potentially leading to a resurgence in fossil fuel generation as we enter winter and the country’s main heating season.
Natural gas price pressure
Italian power companies rely primarily on natural gas to generate electricity, with around 45% of electricity production expected to come from gas-fired power plants by 2023.
By comparison, German power producers relied on natural gas for only 15% of their electricity generation last year, while the European average was 24%.
What’s more, due to the continued decline in domestic natural gas production, over 95% of Italy’s natural gas is imported.
The high dependence on imported natural gas means that most of the fuel used by Italian power companies to generate electricity is at the mercy of the international natural gas market.
In addition, the Italian government has opted to purchase natural gas from other suppliers to replace gas supplies from Russia – which has been sanctioned by EU member states following its invasion of Ukraine in 2022.
The shift from Gazprom, once Italy’s biggest single gas supplier, to other suppliers has tightened gas market flows across Europe and pushed up overall gas prices.
In addition, Italy is filling the growing gas supply gap by importing liquefied natural gas (LNG), which is much more expensive than gas supplied via pipelines.
Pass-Through Costs
Much of the burden of higher gas import costs has been passed on to Italian consumers in the form of higher wholesale electricity costs.
The Italian government is trying to mitigate the impact of rising energy prices by reducing sales taxes and providing subsidies for the construction of renewable energy power generation.
But as utilities are forced to significantly increase renewable energy capacity as part of a new energy security decree passed last year , households are bearing the brunt of rising energy import costs.
Because power providers will face higher capital costs when building new clean energy generation assets, utilities cannot lower home prices in the short term.
This means that Italian energy consumers will continue to pay some of the highest rates in Europe for electricity and energy for the foreseeable future.
The views expressed in this article are those of the author, a Askume columnist.
The views expressed are solely the author’s own. They do not reflect the views of Askume News, which is committed to integrity, independence and non-partisanship in accordance with the principles of trust.
