Boston, MA -- (SBWIRE) -- 08/19/2013 -- Italy's energy options are narrowing. The government has ruled out nuclear power as a source of electricity, and has also decided not to turn to the risky exploration of shale gas, which means that the country is restricting its options to coal, traditional gas-fired and renewable sources of power. While the latest figures show a drop in electricity consumption, Italy will face a rising import bill if it does not increase domestic electricity production capabilities. Improved energy efficiency (Italy is a European leader in terms of smart meter deployment, for example) and transmission and distribution infrastructure will go some way to compensate for a lack of national electricity generation capabilities, but the high prices of electricity bills will test the patience of residential and industrial electricity customers. And Italy's political troubles, economic headaches and question marks over subsidies granted to the renewable energy sector all weigh heavily on utilities. Without clearer government policy, Italy risks a prolonged period of energy insecurity, as few firms will be encouraged to invest in the sector.

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Gas-fired power plants account for the nearly half of Italy's electricity generation capacity, and this figure is unlikely to change over the course of our forecast period; but government ruling means that this gas will come from conventional sources, and not shale gas exploration. Italy has no nuclear power stations and following a referendum in mid-2011, Italians voted against turning to nuclear sources of power.

During the 2012-2022 period, Italy's overall power generation is expected to increase by an annual average of 1.5%, to reach 327.3TWh. Driving this growth is an annual 2.9% gain in gas-fired power. Coal-fired generation is expected to fall by 1.5% per annum, with the use of oil-fuelled generation to drop by an annual average of 13.1% over the period.

Following an estimated decrease in 2012 real GDP of 2.3%, BMI forecasts average annual growth of 1.0% between 2012 and 2022. Over the 2012-2022 period, the average annual growth rate for electricity demand is forecast to be 1.5%.

The key trends and developments in the Italian electricity market are:

- Terna revealed in its Q113 results that it is making progress on the construction of several transmission lines, including the EUR24mn work on the submarine cable between Sorgente and Rizzicoin; the EUR16mn power line between Trino and Lacchiarella; and the EUR16mn power line connecting Foggia and Benevento.
- Edison announced in June 2013 that it is seeking bids for the supply of two generators and other equipment at its 2.6MW Fontanamora hydroelectric project.

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