Why (and how) gas hinders renewables in Italy. Ieefa Report

Italy’s dependence on gas is partly due to existing infrastructure and operational characteristics, writes the Institute for Energy Economics and Financial Analysis. But we are not the only ones to have a lower share of renewable energy in the electricity mix than the EU average

Italy is the largest producer of gas-fired electricity in the European Union, with production equal to that of Germany and Spain combined, and the fourth largest producer of electricity. The country’s share of gas use in the energy production mix is around 50%, almost three times the EU average. Italy is the EU’s fifth-largest producer of renewable energy, with less than half of Germany’s renewable production. Data, these revealed by the latest report from the Ieefa (Institute for Energy Economics and Financial Analytics), which make us, but not only, reflect. Because, in fact, even countries like France, Poland and Belgium are late in using new clean sources in their energy mix.

All the details.

ITALY’S DELAYS IN THE USE OF RENEWABLE ENERGY

An over-reliance on gas production means the country’s solar and wind growth is slower than its potential. Italy’s dependence on gas is partly due to existing infrastructure and operational characteristics. But this should not justify the extensive use of this fuel in energy production to the detriment of the growth of renewable energy. Such a strategy could set a bad example for other gas-dependent countries. The absence of a plan to phase out gas production does not pave the way for levels of renewable growth similar to those of Europe’s main neighbors. The Italian government has openly stated that its gas support policy is one of the main reasons why the country is lagging behind in terms of transitioning away from fossil fuels.

The government has some ambitious goals to develop wind and solar capacity. However, according to the Integrated National Energy and Climate Plan (PNIEC), the announced objectives may be difficult to achieve, based on the historical development of renewable energy. The PNIEC predicts that installed solar PV and wind capacity in Italy should reach 45 gigawatts (GW) and 17.3 GW respectively by 2025. This means that between 2023 and 2025, combined solar and wind capacity is expected to grow by 45%, an unexpected number in line with the results obtained in recent years.

While the three largest electricity producers in the EU – France, Germany and Spain – showed a clear trend to increase renewable energy and reduce gas electricity production, Italy’s electricity mix by 2023 presented a confusing pattern, without any clearly dominant energy source. According to Eurostat, renewable energy provided 41% of the EU’s electricity generation in 2023, up from 35% in 2022. Wind accounted for 18.5% of all electricity generated in the EU this year. last year, followed by hydroelectric (13.5%), solar (9.1%) and geothermal (0.2%).

THE SITUATION IN THE REST OF THE EU

Countries that have a lower share of renewable energy in their electricity mix than the EU average include Slovenia, Finland, Italy, Belgium, Estonia, France, Poland, Hungary, Bulgaria, Cyprus, Slovakia, Malta and the Czech Republic.

At COP28 last year, UN Secretary-General António Guterres said that limiting global warming to 1.5°C, one of the key targets set in the landmark 2015 Paris Agreement, “will be impossible without the phasing out of all fossil fuels.” it is recognized by a growing and diverse coalition of countries. COP28 negotiators agreed on a commitment to triple renewable capacity by 2030.

To achieve this goal, Italy plans to have a 30% share of energy from renewable sources by 2030. According to Eurostat, renewable energy met 38.6% of Italy’s net electricity demand in 2023, an increase compared to to 30.1% in 2022. While this is a significant increase, the data shows there is still room for improvement. Hydroelectric generation increased more than other renewable technologies in 2022 and 2023 (due to hydrology rather than capacity additions), a period during which there were significant changes in gas-fired electricity production.

Italy’s becoming the EU’s largest gas-fired electricity producer was driven by factors related to the availability of gas resources and infrastructure in the country, as well as government guidelines that encouraged the use of such facilities.

The country’s natural gas infrastructure, including pipelines and storage facilities, is robust and allows for the import of gas and LNG.

THE MELONI GOVERNMENT’S PLANS ON GAS AND RENEWABLE ENERGY

The government has established some guidelines and indications that could be questioned since they legitimize gas as a transition fuel at a European level. A scheme developed by the regulator since 2004 allows some Italian gas plants, both combined cycle power plants and open cycle turbines, to receive a capacity payment. This is a government subsidy that keeps them artificially profitable and distorts their exit from the market based on pure fundamentals.

Prime Minister Giorgia Meloni aims to make Italy the main entry point for gas into the EU, taking advantage of the energy crisis and the reduction of imports from Russia. Italy’s strengthening energy capacity shows a similarly confusing pattern as its energy production in 2023. Renewable capacity increased by 25% between 2021 and 2023; LNG capacity has grown by 40% and is expected to continue to increase.

Gas can certainly provide flexible power generation, capable of scaling up quickly when renewable energy production is low. However, there are CO 2 free technologies that could play a similar role but are not sufficiently promoted in Italy:

Pumped hydroelectric power plants represent the largest source of energy storage in Europe. This technology is often dismissed due to high capital investment costs and long construction times, but plants are the largest and most reliable response to intermittency.

Large batteries are expanding in Europe and their cost is falling, making them a substantial source of power reserve in EU markets.
Demand response systems at wholesale and retail levels are rapidly spreading across EU countries. Excessive dependence on gas will discourage the development of such mechanisms.

IS THERE ANYTHING TO WORRY?

The most worrying reason why gas-fired electricity production is not decreasing in Italy is the government’s ambition to make the country a gas hub and use the energy source as a transition fuel to achieve net-zero emissions.

If gas were indeed needed to transition from a thermal to a renewable world, it should only be used as a reserve, not for baseload generation. By using gas as the central pillar of its energy strategy, Italy not only slows the growth of renewables, but also serves as an example to other gas-dependent countries such as Malta, Ireland, the Netherlands and Greece that this model can be followed.