Energy Outlook Apr 2021 – Anno VI n. 16

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The Italian GDP recovery is on track and the electricity demand almost back to pre-crisis levels gives ground for hope in the real economy resilience. Of the roughly 15 TWh demand recovery in 2021 more than 5 TWh will translate into contestable demand for gas-fired combined cycles, with import not expected to regain pre crisis average levels.

Three Short-term Key Factors to Watch:

• Coal Switch Price: year 2020 average CSP was over 10% above the gas-fired production costs for the most efficient coal fired plants and 35% for the average efficiency ones. Year 2021 and 2022 price dynamics make the most efficient coal-fired plants competitive again, but not the average ones, with the CSP remaining around 20% above the gas-fired production costs. This assumes Coal and the CO2 upward trend continuing and remaining relatively stronger than gas. However, almost 10 €/ton of the recent CO2 up move were fueled by financial operators net long positioning, which, as any financial position, is subject to be unbuilt. This puts a short-term downward reversal at risk.
• High hydro contribution to the Italian mix in year 2021: snowpack is higher than average, but in the event of a dry spring or autumn the renewables weight may decrease, risking the pun to average up to 3 €/MWh higher than expected.
• Gas-fired production higher competitiveness than coal-fired stabilizes the level of net import despite demand recovering and the increase in NTC. Lower-than-expected import flows from the northern frontiers would benefit the thermoelectric Italian fleet though, potentially leading to higher baseload CSS (+10%) and PUN (+1%) both in 2021 and 2022.