Context and growth drivers

In a geopolitical scenario strongly conditioned by the conflict in Ukraine, which has placed the issues of energy security and diversification of supplies at the forefront, the new European REPowerEU plan represents the new North Star to strengthen the resilience of the energy system and accelerate the ecological transition.

Towards carbon neutrality in 2050

The international scenario – through the COP21 in Paris, the COP26 in Glasgow and the guidelines of the European Union – requires states and operators in the energy market to accelerate the path towards decarbonisation. The European Union, in particular, has set the target of carbon neutrality in 2050.

The energy transition, started to stave off climate change, must still be accelerated after the Russian invasion of Ukraine. The REPowerEU plan, presented by the European Commission in May 2022, aims to make Europe independent from Russian fossil fuels well before 2030, accelerating the transition to clean energy and at the same time increasing the resilience of the European energy system. In particular, REPowerEU attributes to renewable gases (biomethane and hydrogen) the function of replacing about 50% of the amount of gas that the EU imports from Russia (in 2021 about 155 billion cubic meters).

In this context, the gas DSO are called to play a key role in guaranteeing the energy security of the Union, equipping the respective countries with digital, smart and flexible networks, also able to boost the production of these gases and enable its widespread use.

European and national energy policies

REPowerEUItaly
Green GasAccelerate green gases development, such as biomethane and hydrogen, compared to the previous Fit for 55Development of biomethane to reach 2.5 Bcm by 2026
National Energy ProductionNuclear and coal potential phase-out delayIncrease of national gas production to 5 Bcm (+50%)
Infrastructures DevelopmentIncrease supply from non-Russian routes, new interconnections and maximisation of LNG import capacityNew agreements with exporting countries (Algeria, Azerbaijan, Egypt, Qatar, USA) and new FSRU/LNG
StorageSet up of minimum storage requirement targets by end of summer 2022
Gas and Energy pricesAllow actions to mitigate commodity prices impact on end users – Discussion on European gas priceActions to mitigate commodity prices impact on end users
Energy EfficiencyPush for EU energy efficiency target for 2030 from 9% to 13% (vs 2020)Incentives for buildings renovations (superbonus, ecobonus) and temperatures control
FER Acceleration of renewable energy sourcesRenewables acceleration, which will have to represent 45% of final energy consumption in 2030 (compared to the previous target of 40%) and will be driven by solar.

We invest to play a leading role in the energy transition

The strategic choices made in recent years by the Group have anticipated the approach of EU institutions and we are already aligned with the new targets and guidelines set in the REPowerEU.

We believe that our and other gas infrastructures will continue to play a key role in the energy transition ensuring energy system the needed flexibility, security and climate change resilience. The most important challenge for DSOs will be to guarantee their network is able to distribute and dispatch renewable gases such as biomethane, synthetic methane and green hydrogen. Having a “full digital” network is the technical precondition for effectively managing the distribution of renewable gases.

The Strategic Plan is designed to support and foster the energy transition and contribute to security of supply. We are investing to repurpose and upgrade our network to increase its efficiency and resilience andenable green gases distribution. We are also committed to improve the energy efficiency and to achieve the decarbonization of our operations.

Our strategy is built taking into account several scenarios, both qualitative and quantitative, including those specifically related to climate change and considered the emerging related risk and opportunities (physical and transitional) for the company and its targets. Among the scenarios considered we flag:

  • Climate Physical Scenarios: RCP 1.9, RCP 2.6, RCP 4.5, RCP 8.5;
  • Climate Transition and Energy Scenarios: IEA (STEPS, APS, NZE); IEA World Economic Outlook Scenarios, IRENA and McKinsey scenarios on hydrogen, ENTSOG Distributed Energy and Global Ambition Scenarios, PNIEC (Italian National Energy Plan), EBA for biomethane. All envisage an acceleration on energy transition in line with RCP 1.9.

The REPowerEU plan sees a strong growth in Biomethane production and hydrogen production and imports by 2030. For biomethane the new 2030 target of 35bcm doubles the previous one, while for hydrogen production and import is set to reach 20mt by 2030 (4 times the Fitfor55 target).

Currently Italy is the world’s fourth largest biogas producer and biomethane production is expected to accelerate in the coming years supported by regulation.

Regarding hydrogen, we are developing several initiatives ongoing to ensure network readiness for hydrogen distribution and blending. We have already completed the analysis and preliminary technical assessment, where the preliminary results have showed high levels of compatibility with hydrogen blends up to 10% and we are identifying the investments necessary to upgrade the network.

The legislative and regulatory framework

The distribution and measurement of natural gas is regulated by the Regulatory Authority for Energy, Networks and Environment (ARERA). Among its functions:

  • The calculation and updating of the tariffs
  • The provision of rules for access to infrastructure and for the delivery of the related services.

The rate system establishes in particular that the reference revenue for the formulation of rates is determined so as to cover the costs incurred by the operator and allow for a fair return on invested capital.

Three cost categories are recognised:

  • The cost of net invested capital for RAB (Regulatory Asset Base) purposes through the application of a rate of return of the same;
  • Economic-technical amortisation/depreciation, hedging investment costs;
  • Operating costs, hedging operational costs.

 

 

We are today in the fifth regulatory period, which starts from 1 January 2020 to 31 December 2025.

Covid-19 pandemic

The continuation of the Covid-19 pandemic has generated a phenomenon of social insecurity, albeit faced with a substantial recovery that has marked the national, European and world scene. At two years since the emergency first started, in fact, most countries are finding themselves addressing a series of peaks in the health emergency, alternating with less critical periods. The pandemic has speeded up a whole series of evolutions in how companies work, as they found themselves forced to innovate to adapt quickly to the changes. In this scenario, Italgas showed exceptional resilience, guaranteeing continuity of service to around 8 million customers in Italy, while at the same time allowing its people to operate in complete safety.

Precisely in this situation of extraordinary unpredictability, Italgas gathered its first results on the digital transformation of processes, assets and people launched in 2017. Investments in digitisation have allowed, from the very start of the pandemic, for work to be reorganised and all activities carried out from a remote position. Still today, the presence in the company office is alternated with long periods spent working from home, to guarantee maximum employee safety. In addition, thanks to the development and application of innovative technologies, such as “ShareView” and “WorkOnSite”, it has become possible to efficiently manage the network from a remote position, reducing the number of trips to the field and, consequently fuel consumption and CO2 emissions.

Recording twenty consecutive quarters of growth since its return to the stock exchange, Italgas has shown itself capable of continuing its development and transformation even during the health emergency, supporting the country’s economic fabric, contributing to the economic recovery thanks to important investments and playing a lead role in the energy transition.

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