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The Italian Renewable Power Market

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The Italian power market will undergo significant changes in the next few years as its fuel mix undergoes a transformation, with more renewables and a decline in coal. Meanwhile, an increasing number of interconnections among Italy and its neighbours means that major structural changes in the German, French, and other markets will have implications for the Italian power sector. But, despite a substantial tightening in the power market in Germany from early next decade as a result of its nuclear and coal closure program, S&P Global Platts Analytics expects Italy to retain its position as the premium market in terms of power prices in Western Europe to 2025, and for prices to rise consistently in real terms between 2020 and 2025. This is partly due to Italy's large gas capacity, which makes its power prices heavily dependent on PSV ("punto di scambio virtuale" or virtual trading point) gas prices, which are also consistently above those of other European hubs. S&P Global Platts Analytics forecasts PSV gas prices to fall from 2018 levels, when they were at about 25€/MWh, until the end of the decade to below 20€/MWh but to recover from 2021 as a reduction in liquefied natural gas (LNG) imports and lower European gas production reduce the competitive pressure on Russian gas.