New gas power in Italy could waste billions and miss chance to cut home bills
Clean energy technologies will keep the lights on at lower cost
LONDON, March 24 – Plans to build 14GW of new gas power plants in Italy could threaten the country’s climate targets, waste up to €11 billion of investment, and miss a chance to cut household bills warns a new report from the financial think tank Carbon Tracker released today.
It reveals that a combination of clean energy technologies can already offer the same level of grid services as gas, at a lower cost. The Clean Energy Portfolio uses power from onshore wind and utility-scale solar, backed up by battery storage and demand response. Investment in energy efficiency also plays a role.
“Italy will be making a mistake if it replaces coal power with gas when clean energy technologies can keep the lights on at lower cost. If developers go ahead with plans to build 14GW of new gas capacity they will penalise customers and make it harder to achieve international climate targets. Plans to build out large pipelines of gas power in both Italy and the UK raise questions about their climate leadership, as they prepare to co-host the COP26 climate summit this year.” Carbon Tracker’s Head of Power & Utilities, Catharina Hillenbrand Von Der Neyen.Italy’s National Energy and Climate Plan aims to promote lowest cost clean energy, align with EU climate targets and improve the country’s energy independence. But the report notes that a CEP would not only lead to lower bills and reduce emissions, but also offer greater energy security and independence by reducing Italy’s reliance on costly gas imports. Italy has committed to closing its last 8GW of coal power by 2025. Developers plan to build 14GW of new gas plants in the next decade, including 5.8GW which has already been awarded capacity market payments and is due to come online by 2023. However, the report finds they could be left with €11 billion of stranded assets which will not make an economic return, leading to impairment. Foot Off The Gas - Why Italy should invest in clean energy calculates that a CEP will deliver the same grid services as a new Combined Cycle Gas Turbine (CCGT) plant at lower cost, providing the same monthly energy, meeting the top 50 hours of peak net load, and offering the same level of grid flexibility. In some months the CEP would generate more energy. The report warns that if Italy pursues gas, rather than the low-cost clean energy solution, consumers could face comparatively higher electricity prices. This route will also make it harder to meet Italy’s new climate target for a 60% reduction in emissions by 2030, because the new gas plants would produce 18 million tonnes of CO2 a year - equivalent to 6% of Italy’s total greenhouse gas emissions in 2019.
“In its draft national plan to access NextGenerationEU, Italy plans about EUR 70 billion in green investments which include efficiency, grids and energy storage to integrate renewables. This clashes with the planned long-term procurement of new gas capacity through the Italian capacity market. Moreover, the study shows that flexible power from gas is going to be more expensive than from an appropriate combination of renewables, storage and efficiency." Michele Governatori, Energy Programme Lead, ECCO Think Tank (local partner)Last month Carbon Tracker released a report showing that in the UK a CEP can now offer the same level of grid services as gas at lower cost.[1] On the same day, British power company Drax cancelled plans to build Europe’s biggest gas power plant in the UK, but developers still plan to build 11GW of gas power which would produce 18 million tonnes of CO2 a year - equivalent to 5% of the UK’s total greenhouse gas emissions in 2019. Carbon Tracker warns they could be left with €7.9bln of stranded assets that will not make an economic return.
“Carbon Tracker’s ‘Foot Off The Gas’ reports are a significant contribution to the debate around the role natural gas should play in Europe. They provide additional arguments for seeing a tapering in its usage, by showing how the support for plans to invest in new capacity in Europe are less and less justified, be it from an economic or a climate point of view.” Thibaud Clisson, BNP Paribas lead analyst on Utilities and EnergyPower economics reached a tipping point in 2019, when the cost of clean technologies fell to the point where a CEP could produce electricity in Italy at the same cost as a new CCGT, €67/MWh. However, costs of clean technologies – particularly battery storage - are forecast to continue to fall, while gas plants are exposed to rising carbon and volatile gas prices, as has been seen recently with sharp price rises. By 2030, CCGT gas power at €75/MWh will be 60% more expensive than a new CEP on a Levelised Cost of Energy (LCOE) basis. A CEP is expected to produce electricity at a cost of €47/MWh. The optimum mix of clean technologies needed to replace a gas power plant varies by country. In Italy the contribution of each resource to a CEP would be divided as follows:
- 31% utility-scale solar – providing enough generation for most of the day;
- 17% onshore wind – complementing solar and providing power at night;
- 16% battery storage – essential for meeting peak demand;
- 27% demand response – reducing the need for generation by shifting consumption;
- 9% energy efficiency – with scope for upgrading old buildings.