The cost of electricity in Italy has never been higher. This is what emerges from the data published by Arera, the Regulatory Authority for Energy, Networks, and the Environment. In the first weeks of 2022, the Italian energy prices per MWh had an average of 216,35 €.
According to the same authority, the price is composed of 80.8% of energy, 8.4% of transportation and meter, and 10,8% taxes, while the system fees have been deducted from the government for the last quarter of 2021 and the first quarter of 2022.
The main driver of such a huge increase is found in the cost of energy: in the last period, from the third to the fourth quarter of 2021, the price went from 60-80 €/MWh to above 280 €/MWh, and the surge has not ended yet.
In the second quarter of 2021, more than 20% of the total composition of the bills was cancelled with the decree-law of September 27 2021. Without this intervention from the Government, the price of energy would have been even higher for consumers.
The Authority confirmed the transitional cancellation of the general grid tariffs and enhanced the social supports, lightening the impact on 29 million families and 6 million micro-enterprises. For Arera, the electricity bills for the typical family in the current year will have an increase bigger than 55% for electricity and +41.8% for gas.
The main reasons behind the huge increase in the commodity price can be found in the spot price of natural gas. In fact, it increased dramatically from January to December 2021, by almost 500% (from 21 to 120 €/MWh in monthly average values) and it´s still increasing. This got worse with the increase of natural gas demand for heating, and for thermoelectric production facing the small renewables output, and reduced nuclear capacity due to shot down or maintenance in neighboring countries.
In fact, more than half of electricity in Italy is generated using gas turbines, but the country imports over 90% of this resource from abroad.
In addition, during the same period, the price of CO2 more than doubled (from 33 to 79 €/tCO2). The price growth of the fuel and of CO2 has influenced the wholesale electricity market, which in the same period increased by almost 400% (from 61 to 288 €/MWh).
Similar repercussions on prices for final consumers have occurred throughout Europe. With reference to the first quarter of 2022, the prices recorded in December are not decreasing, but settling around 118 €/MWh for natural gas and around 300 €/MWh for electricity.
Now that wholesale prices are soaring, the interest over medium and long term contract is growing among companies, which are looking more and more for PPA contracts (Power Purchase Agreements), for the long-term supply of electricity at agreed rates. Similar contracts are able to ensure fixed power prices that would decrese the spot market volatility.
Installing more renewable capacity could mitigate the average spot prices on one side, althought, volatility would be dependent on weather conditions even more over the year.
More opportunities for renewable energies can come from this market, although, it´s still expected an increase of energy prices on the medium and long term in absence of available grid-scale storage capacity or dispatchable capacity inflexible to fuel price variations such as nuclear.
Green Dealflow – is a matchmaker for professional investors and asset owners in the solar and wind industry. You can create a free account and search for assets to invest in, or ask us about off-market projects, find investors for your projects with discretion (off-market), or PPA Off-takers can look for business partners on a “no cure – no pay” basis. Further to this, Green Dealflow delivers news, blog posts and business intelligence, e.g. through a transaction database and monthly reports.