Italy's gas and liquefied natural gas (LNG) incentive program is misaligned with market realities, driving investment towards underutilized infrastructure, according to a new research from the Institute for Energy Economics and Financial Analysis (IEEFA) on Monday.
鈥淭he existing regulatory programme may encourage excessive capital expenditure on redundant gas and LNG infrastructure, despite Italy鈥檚 recent declining demand for both fuels,鈥� said the US-based IEEFA in a statement, calling for better alignment of government and regulatory support with market needs.
Italy is set to triple its regasification capacity between 2022 and 2026, despite a 19% drop in gas demand since 2021 and a 12% decline in LNG imports in 2024, according to the IEEFA.
鈥淎s demand continues to decline, Italy鈥檚 LNG consumption could be less than one-third of its import capacity by 2030,鈥� it added.
According to the IEEFA research, Italy's energy infrastructure company Snam is the main beneficiary of this incentive scheme, with its regulated revenues increasing by 鈧�272 million, or 20.1% year on year, in the first half of 2024. The majority of this growth, namely 鈧�160 million, comes from a higher weighted average cost of capital and regulated asset base in Snam鈥檚 gas transportation and storage segments.
-Italy's ambition to become gas hub risks jeopardising competitiveness of its energy sector
Commenting on the research, Ana Maria Jaller-Makarewicz, an energy analyst at the IEEFA, noted that incentives to invest in infrastructure must be driven by demand.
"In the case of Italy, it鈥檚 currently the other way around, with regulated revenues driving infrastructure buildout even if there is not enough demand to justify it," Jaller-Makarewicz added.
"Time鈥檚 up for Italy to acknowledge its declining gas demand and that of its European neighbours," she explained. "The country鈥檚 ambition to become a gas hub risks jeopardising the competitiveness of its energy sector by misallocating government support to gas projects that don鈥檛 offer long-term energy security solutions."
Snam dominates Italy's gas market, owning most LNG terminals and operating Europe's largest pipeline network, IEEFA said, adding Italy鈥檚 energy regulator ARERA launched Regulation by Objectives of Expenditure and Service (ROSS) in 2021 to incentivize performance and support Italy's energy transition. Despite this change, Snam's investments and revenues continue to rise, IEEFA said, while Italian gas tariffs remain among the highest in the EU.
By Handan Kazanci
Anadolu Agency
energy@aa.com.tr