An Overview of Italy's Energy Mix

In Italy, the issue of energy supply is always of great interest because this country depends on foreign imports for 83% of its primary energy needs. This is due to the limited availability of domestic mineral resources, combined with a strong dependence of the electricity production on fossil fuels. The present situation should be viewed in the light of the decision to freeze the nuclear program following the referendum of 1987. Italy's energy strategy subsequently turned back to the thermoelectric sector, which was updated, during the latter part of the 1990's, with several modern and efficient plants, mainly based on a combined cycle structure and fed by natural gas. In addition, the Italian government has started to fund renewables, in compliance with the European regulations, and these forms of energy have experienced a significant increase, especially in recent years. The current energy-mix makes the Italian economy more exposed to the global geopolitical instabilities of the oil- and gas-producing countries, compared to northern European countries. Moreover, with the shift of economic activities towards the service sector, the demand of electric energy is increasing and its costs, weighted also by renewable incentives, are becoming more and more significant for Italian users and the economy in general. These issues, coupled with the constraints set by the European 20-20-20 plan, in particular in terms of polluting gas emissions and energy savings, led the Berlusconi government (2008-2011) to resort to a new nuclear program. This relied on the construction of 4 EPR power plants (at least) in order to cover 25% of Italy's entire electricity needs. But the program was stopped by another referendum in June 2011, whose result was strongly influenced by the Fukushima tragedy. However, a new national energy strategy has not yet been defined. This paper analyses the present energy mix, with particular attention to the electricity production system, in order to identify the effects of previous strategies and to understand what kind of choices Italy should make to meet the 20-20-20 requirements and to integrate efficiently its energy market into Europe's. Since data for 2010 were the most recent, definitive figures available when the paper has been written, almost all the analysis here refers to this year. All reported trends also ended in 2010. Section 1 provides a snapshot of Italy's energy balance, based on 2010 data, and includes an analysis of the historical trends of primary energy and electricity consumptions, considering also the economic situation. To this end, trends in the main energy indicators are reported, including: primary energy/GDP, electricity/GDP and CO2/GDP. Section 2 describes the primary energy mix, highlighting Italy's strong dependence on oil and natural gas, comparing it with those of the main European countries. A description of the electricity production system is also given; more specifically, the thermoelectric and hydroelectric plant fleets are analyzed in detail, along with the development of renewable sources. Renewable power capacity has constantly increased during last years, but the corresponding regulation has not always been clear, often changing year by year, causing a tumultuous growth in this sector, which has not been supported by a fundamental enhancement of the transmission network. For these reasons, some information about the evolution of the Italian tariff system is also given. Finally, the electricity imports from nearby European countries, covering 13% of the gross demand, are reported. Sections 3 and 4 deal with the electricity and natural gas markets respectively. First of all, the current structure of the final markets, after their liberalization, and the contributions of the main operators are analyzed. Then final prices are compared with those of other European countries. Particular attention has been given to the development of the gas transmission network. This may be considered fundamental, given the strong dependence of Italy on this energy source. Section 5 concerns with Europe's 20-20-20 plan requirements. The policy choices in the field of carbon emissions, energy savings and renewables are presented along with the results obtained. Section 6 is about the future prospects of the Italian energy system