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(Bloomberg) — Italy’s wholesale power prices climbed to the highest since winter 2022 as hot, dry weather forces it to rely more heavily on costly natural gas.
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High temperatures are boosting air conditioning needs just as hydropower reservoirs are depleting rapidly. That’s bolstered Italy’s gas use in electricity generation at a time when supplies have been tightened by the war in the Middle East.
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Italy’s day-ahead power price for delivery on Wednesday rose to €208 per megawatt-hour, the highest level since December 2022, according to Italian Power Exchange data. Peak power demand is due to rise Wednesday versus the previous day, reaching 47.6 gigawatts at around 5 p.m. local time, according to forecasts from the Ggestore dei Mercati Energetici.
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While European power prices have retreated sharply from the highs seen during the energy crisis following Russia’s invasion of Ukraine, this summer’s extreme heat and disruptions to LNG flows have driven prices steadily higher.
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Demand for electricity in Italy rose to the highest level for July since 2019 as temperatures climbed. At the same time, Italy’s northern river basins and lakes continue to face water stress after a period of limited rainfall and high temperatures, putting hydropower under pressure.
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Italy Hydro Slump May Lift Demand for Thermal Plants: BNEF Chart
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Italy already relies more on gas for power generation than other major European countries. In July, gas generation met 38% of Italy’s power needs, according to ENTSO-E data, up from a year earlier and only slightly below a high set in 2022.
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Italy has also leaned heavily on neighboring markets, with net power imports averaging 7.8 gigawatts in the week through Aug. 3. France is a key source of electricity, but hot weather there has reduced the availability of some nuclear reactors, limiting how much power it can export.
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