Energy: Italy, transition loses its momentum and domestic prices rise at a greater pace than in the EU

CO₂ emissions not falling – ISPRED energy transition index worsens

Energy transition in Italy is going through a phase of stagnation, mainly since greenhouse gas emissions are not falling, also due to the slowdown in production from renewable sources and the price trend (prices overall remain above the EU average). This was affirmed by the Analysis of the Italian energy system released by ENEA (www.enea.it ) which, for the first six months of the year, shows a worsening (-5%) in the ENEA-ISPRED index that ‘gauges’ energy transition on the basis of energy prices, decarbonisation and national energy system security. “Of these three variables of the index, only security saw a positive trend (+5%) mainly thanks to considerable availability of raw materials on international markets, but prices and decarbonisation values fall (-11% and -8%, respectively) to the detriment of the index”, explains Francesco Gracceva, the ENEA researcher who coordinates this analysis. “Despite economic stagnation, the decline in industrial production, particularly in energy intensive sectors and the drop in primary energy consumption (-1%), noted for the first six months of the year, CO₂ emissions did not fall, due to marked acceleration during the second quarter (+4%).” These data, Gracceva adds, “illustrate how hard it is to ‘decouple’ energy consumption and the economy, a decidedly negative phenomenon that has emerged since 2015 to the present day. And our projections for the rest of the year confirm this criticality”. A further concern regards prices. Despite the sharp downturns in the wholesale markets, they are higher than in the first half of 2018. Indeed, gas prices have risen by 10% for industrial consumers and 8% for homes, compared to an average EU increase of 5%. Electricity has risen by 7%, both for industrial consumers and homes (vs the + 4% EU mean). Gracceva also remarks that “For the typical domestic consumer the price of electricity has constantly increased over the last decade, with a +23% hike between the first half of 2019 and the first half of 2009. On the other hand, companies have begun to take advantage of a series of falls. Since early 2018 they have been approaching the EU mean, particularly energy-intensive industries, thanks to the reductions introduced by the reform of system charges”. Add to this the fact that, over the last six years, the sharp fall in gas prices in the European market (-33%) has translated into a decrease for companies (-4%), while household prices rose by 9%, mainly due to the increase in system charges and expenses for energy transport and meter management. ENEA’s scenario Analysis also shows a 1% drop in energy consumption in the first six months of 2019 compared to the same period in 2018 and an overall decrease in production from renewable sources (-2.5%) mainly due to the dramatic hydroelectric sector downturn (-17%). Compared to fossil fuels, production is generally unchanged vs levels a year ago: the decrease in the use of coal and oil was offset by the increase in gas (+4% in the half year) due to the greater demand for both direct use (+11%, especially in the heating sector) and thermoelectric sector use (+26%), driven by low water availability and reduced electricity imports (-19%). Oil consumption has fallen by 2%, but, as to transport, delayed renewal of the vehicle fleet is a worrying development (-3% in registrations in the first half of 2019, as was already seen in 2018 vs the previous year). Also worrying is the increase in mean specific emissions of the new vehicles registered (+ 6% of gCO2/km in the first half of 2019, linked to the characteristics of the models sold), which leads to an estimate for the end of the year of a worsening in mean emissions for the entire car fleet. The sharp decline in use of coal is ongoing (-14% compared to the first half of last year), mainly due to the reduction in electricity production. According to data from the Enel energy company, in the first half of 2019 the Group's production fell by a third compared to the levels of the same period a year ago.

The full Analysis for the first half of 2019 is available in Italian version at the link: https://www.enea.it/it/seguici/pubblicazioni/analisi-trimestrale-del-sistema-energetico-italiano