The Italian Gas Market – Challenges and Opportunities
The Italian gas market is the third largest in Europe with strong demand growth especially in the power generation sector up to the mid 2000s. But projections of demand growth from that era have not been realised. Clearly the impact of the financial crisis and subsequent recession has had a significant impact, exacerbated by the growth in wind and solar generation capacity.
Market liberalisation in the 2000s failed to achieve levels of competition in the mid and downstream sectors to the extent seen in North West European markets. This resulted not only in some of the highest European end-user gas prices, but also delayed development of a liquid trading hub. Only in late 2012 did prices at the Italian gas hub PSV align with the prices at the Dutch gas hub TTF and other North West European hubs after capacity availability issues in linking infrastructure were resolved.
Italy’s contracted supply commitments considerably exceed current and envisaged gas consumption levels. Scenarios on gas demand are not optimistic and will ultimately depend on future economic activity, tempered by the growth of renewable capacity.
This paper takes these issues into consideration, and offers some insights regarding the challenges but also the opportunities that will arise in the Italian gas industry up to 2020.