Boston, MA -- (SBWIRE) -- 11/15/2013 -- While Italy produces around 90% of the electricity it needs for domestic consumption, it has the potential for greater self-sufficiency. Having ruled both nuclear power and shale gas exploration out, growth in domestic electricity production is centred on coal, conventional gas, renewable and hydroelectric sources of power. Of these we forecast that gas-fired sources of power will continue to grow, as renewable have been hard hit by the government's decision in mid-2013 to stop granting feed-in tariffs for new solar installations, while offshore wind continues to be characterised by a lack of interest. In the short term, at least, the greatest investment opportunities are emerging in the transmission and distribution sector, with improved connections between Italy, its islands, and bordering countries. The government may be preparing a series of incentives to attract international investors, as part of its 'Destination Italy' programme, but we do not expect the power sector to be convinced until Italy's economy is back on track.

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Gas-fired power plants account for just under 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 did launch a gas futures exchange in September 2013, however, which is a move that aims to boost Italy's role as a regional trading hub for gas, and could have implications for gas-fired power generating capacity. 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 327.0TWh. 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 13.0% 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 announced in June 2013 that it will invest over EUR1bn in the development of Capri's electricity grid, connecting the island to the Italian mainland for the first time.
- Terna announced in July 2013 that it had begun work on a new electricity interconnection between Italy and France, which will see a 190km underground cable connecting the two countries. The cable is scheduled to begin operations in 2019.
- Switzerland's BWK acquired five small hydroelectric power projects in the Lombardy province from Italy's A2A in late August 2013. The deal is valued at around US$49.2mn.

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