Italy Power Report Q3 2016 - New Market Study Published

From: Fast Market Research, Inc.
Published: Thu Jul 07 2016

Italy's power sector faces numerous challenges in the short - to medium term. As well as falling energy prices across Europe, consumption rates are also declining in Italy, undermining demand for any new installed capacity. Many power firms are phasing out ageing coal-fired power plants and overall we expect to see a decline in thermal capacity over the forecast period. Some growth will be realised in the non-hydropower renewables sector, particularly solar and wind power , which are already well established in Italy. We also expect to see further solid investment in the country's national transmission grid, as well as upgrades and expansion work to cross-border connections. The primary risk to our forecasts, and to investor interest, stems from an uncertain regulatory environment in relation to renewable energy subsidies beyond end - 2016.

Latest Updates And Structural Trends

Natural-gas fired power is currently the largest single contributor to Italy's domestic energy mix, accounting for almost 45% of total electricity generation in 2016. Falling gas prices throughout Europe, while potentially boosting short-term profit margins, will undermine investor interest in this sector and we expect to see limited growth in natural-gas generation throughout the forecast period through to 2025.

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The outlook is more subdued for coal and oil-fired thermal power. Ageing thermal infrastructure is being phased out and in 2016 we expect coal-fired generation to contract

12.9%, while oil-fired power will fall 21.0%, with further declines expected throughout the ten-year forecast period.

In contrast, non-hydropower renewables will see slow, but steady growth as new wind and solar power plants are brought online. The wind power sector will receive a short-term boost from the April 2016 European Commission approval of regulatory updates, which will release EUR400mn in subsidies for the year, although a lack of clarity for post-2016 subsidies remains a headwind to growth.

Overall we expect generation in Italy to increase from 281.71TWh in 2016 to 286.95TWh in 2025, averaging annual growth of less than 1% as small gains in renewables are offset by a loss of capacity in thermal power. At the same time consumption is expected to decline from 291.6TWh to 280.4TWh, in line with efficiency gains and the subdued economic outlook in the country.

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.

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