Energy: Italy, declining prices and consumption on the rise in 2017

2017 registered rising final energy consumptions (+1.38% as compared to 2016, in line with the +1.5 % in GDP) and a slight decline in CO2 emissions (-0.5%) mostly thanks to sectors such as electricity generation (-5%) and transportation (-2.2%). New historical heights for renewables in total electric consumption: wind and solar reached a 70% peak per hour (17 april 2017) and the whole of RES (Renewable Energy Sources) an 87% peak. This is what emerges from the Quarterly Review of the Italian Energy System, edited by ENEA, which examines data in the fourth quarter of 2017 and makes an assessment of the entire year. The study also shows an increase in natural gas consumptions (+6%, after the 5% in 2016), an energy source which firmly led the mix with a 36.5% share, showing decreasing prices in all consumption groups and running counter to EU trends.

In the mix, oil dropped below 34%, with consumption falling (-1% and almost 10% more as compared to ten years before), while coal continued to witness a double-digit contraction for the second year in a row (-12%, after -10% in 2016, with a 6% share in the mix). In the mix, Renewables reached a 19% share, with an 8% growth of intermittent energy sources (wind and solar” which offset the steep  decline in hydroelectric power (-14%); as regards final consumption the share of renewable energy sources remained over the 2020 EU target of 17%, while its 2030 target of a 28% share looked harder to meet.

“In 2017 business gas prices decreased while EU prices remained unchanged. This was due to the fact that the rise in prices of wholesale raw materials were offset by two fees cancelled in the electricity bill which allowed a saving especially for middle and high consumption groups, while a wide price gap between small and big users was confirmed” Francesco Gracceva of ENEA, coordinator of the Analysis, explained.

Prices of electricity were expected to slightly drop, up to 2% in the middle to high consumption group, mostly thanks to a reduction of system charges which offset the increase in wholesale prices. Nevertheless prices in Italy remained the highest in the EU Countries.

The demand for electricity rose by 2% mostly because of the climate, which caused a sharp rise in consumption during summer. The data confirms that the long term trend of consumption decline was replaced by a stationary trend with signals of a modest recovery. As for end-use sectors, consumption dropped in road transportation (-2.6%), despite an increased vehicles traffic.

It’s a potentially significant data, which could indicate a decoupling of energy consumption and traffic, explained by an increased efficiency of the vehicle fleet which, with over 2 million new registrations, underwent a significant renewal of the car fleet in 2017.

The ENEA ISPRED Index, which measures the transition of the national energy system based on security, prices and carbon dioxide emissions, shows an 8% drop as compared to 2016, following a worsening of decarbonisation scenarios and security and an improvement in prices.

“Although declining for the second year in a row- Gracceva went on_ CO2 emissions didn’t decrease in coherence with the 2020 goals; consequently, the ISPRED decarbonisation component showed a 14% worsening. Furthermore, the objective of a balanced and synergic development of the components of the energy trilemma, security-affordability-decarbonisation, was not achieved. Between 2010 and 2017 we witnessed instead to a succession of stages in which some aspects  improved while others worsened. Last year, for instance, a worsening in decarbonisation prospects counterbalanced an improvement in prices”.

A worsening occurred also on the component “energy security” of the ISPRED, with a 6% drop as compared to one year ago,  since the improvement of the oil indexes (+3%) was offset by the worsening of the indexes of security of the electrical and natural gas sytem (respectively +3% and +20%)

In particular, France’s nuclear crisis and the simultaneous surge in gas demand at the beginning of 2017 showed that in the case of a combination of extreme events (cold peaks, disruptions of supplies, problems in confining markets), major issues of adequacy could arise.

“As for the gas system, it’s telling that between 2017 and the beginning of 2018 a state of crisis was declared several times (January and December 2017, February 2018) and the state of emergency once. The crisis were overcome but the peak of prices and spread were very high. Furthermore, the surge in gas demand reinforced the all-italian peculiarity of predominance in the mix and dependence from foreign sources at historical heights” Gracceva concluded.

The ISPRED Index shows significant improvements in prices of electricity (+17%) and natural gas (+6%), while it shows a decrease in diesel oil (-25%).

Finally, this issue of the Quarterly Review includes an in-depht analysis of some energy issues which have raised the interest of most of the general press. The study showed that the five topics most frequently dealt with in newspapers are: oil trends in the international market; business strategies of the major italian energy companies; the National Energy Strategy (SEN); energy efficiency in buildings; the creation of the TAP pipeline.

Unabridged Quarterly Review