BMI View: Non-hydropower renewables a nd transmission networks will see most i nvestment within Italy's power sector over the coming years, due to planned incentives for non-PV renewable s and a growing focus on the development of new cross-border power interconnection s . Amid falling wholesale power prices and stagnant power consumption growth, continued d elays in the introduction of a capacity market will encourage thermal power utilities to retire unprofitable assets and consolidate.
|e/f = BMI estimate/forecast. Source: Terna, EIA, GSE, BMI|
|Generation, Total, TWh||281.647||281.705||281.631||281.963||282.423||283.013||283.696|
|Consumption, Net Consumption, TWh||292.2||291.6||290.1||288.7||287.8||286.4||285.2|
|Capacity, Net, MW||115,971.9||111,400.4||109,016.1||108,939.4||109,311.9||109,876.7||110,847.4|
Latest Updates And Structural Trends
Cheaper natural gas will boost Italy's spark spread in 2016, but will reinforce the problems facing the country's thermal power sector in 2017 as the lower price of gas is pushing forward power prices lower. Faced with this challenging operating environment - which will be compounded by contracting power consumption and delays to the introduction of a capacity market - utilities will continue to retire excess thermal power capacity and consolidate, to cut costs and improve efficiency. The European Commission (EC) is reviewing capacity markets mechanism in Europe, with guidelines on the scheme's implementation reportedly scheduled to be released by end-2016.
Utility A2A has been most active in the consolidation trend. In January 2016 it acquired utility Linea Group Holding, and in November 2015 it reached an agreement with Sorgenia on the shared management of two combined-cycle gas turbine (CCGT) power plants for five years. We expect the company to continue with the acquisition of smaller municipal utilities in the north of Italy, in line with its plan to create a new company that will integrate its CCGT assets with those of all its subsidiaries.
Data released by Terna on Italy's power consumption showed power demand in the country grew 1.5% in 2015, in line with our estimate. It is the first time that power consumption in Italy expands since 2011, but we believe this will not be the start of a trend. Growth in power demand in 2015 was due to unseasonably hot weather, while structural dynamics in the Italian economy and power sector suggest consumption of electricity in Italy will resume its slow contraction over the next few years.
A regulation from the Ministry of Economic Development (MiSE) which will extend existing incentives to new non-photovoltaic (PV) renewables capacity until December 2016 has yet to enter into force: the bill was still being reviewed by the European Commission at the time of writing. According to the MiSE regulation, the government funding ceiling for non-PV projects will remain capped at the current level of EUR5.8bn (USD6.5) until December 2016. However, a revision in the method of accounting for the incentives already allocated to plants yet to be built is expected to free up resources to incentivise the development of additional capacity.
Market players had feared delays in the final approval of the MiSE regulation by the EC would mean the ceiling to incentives would be reached before the new accounting rule was applied, but this hasn't been the case so far. As for data released by Gestore Servizi Energetici (GSE) in January 2016, cumulative funding for the period was EUR5.65bn.
There is growing political support for the development of a submarine and onshore transmission line that will connect the power systems of Italy and Montenegro. The project has support from the EU and European Bank for Reconstruction and Development (EBRD), will be carried out by Terna and is expected to be completed by end-2017.
The Italy Power Report features BMI Research's market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.
The Italy Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.
- Use BMI's independent industry forecasts for Italy to test other views - a key input for successful budgeting and strategic planning in the power market.
- Target business opportunities and risks Italy's power sector through our reviews of latest power industry trends, regulatory changes, and major deals, projects and investments in Italy.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Competitive Landscape analysis.
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering power markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the power sector and within the broader political, economic and business environment.
BMI’s Power Forecast Scenario
Forecasts to end-2024 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Generation: Electricity generation total, thermal, coal, natural gas, oil, nuclear, hydropower, hydro-electric pumped storage and non-hydropower renewables.
- Transmission and Distribution Losses: Electric power transmission and distribution losses.
- Trade: Total imports and exports.
- Electricity Consumption: Net consumption.
- Electricity Capacity: Capacity net, conventional thermal, nuclear, hydropower and non-hydroelectric renewables.
BMI’s Power Risk Reward Index
BMI’s Risk Reward Indices provide investors (power companies, service companies and equity investors) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors,
Structure, size and value of the industry sector; overview of the industry landscape and key players; an assessment of the business operating environment, sustainable energy policies, pricing and the latest regulatory developments.
Key Projects Database
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by location, sector type, capacity, value, companies and operational status.
Illustration of the power industry that exploits our data-rich, in-depth analysis of the leading players in the sector and examination of operational results, strategic goals, market position and the potential for investment.
Power Outlook long-Term Forecasts
Regional long-term power forecasts covering electricity generation, consumption and capacity for thermal, hydroelectric and nuclear power. These are supported by a country specific overview, alongside an analysis of key downside risks to the main forecasts.
Providing BMI’s near-term economic outlook for the region as a whole, as well as taking a close look at countries of particular interest and the latest trends and developments.
The Power Market Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports, including Energy Information Administration (EIA), World Bank (WB) and United Nations (UN).