Italy was one of the first European countries to completely stop domestic coal production, with the last facility closing in 2001. The importance of coal in Italys energy needs declined to only 7.3 percent in 2003, one of the lowest levels in the EU. The country consumed 24.2 million short tons (Mmst) of coal in 2003, the bulk of which fueled electricity generation. According to Eurostat, Italian imports of coal during the first ten months of 2005 came principally from South Africa (20 percent), Colombia (13 percent), and Australia (12 percent).
Italy had 69.5 gigawatts of installed electricity generating capacity in 2003. In that same year, Italy generated 270 billion kilowatthours (Bkwh) of electricity, while consuming 302 Bkwh. Most generation comes from conventional thermal sources (82 percent), with smaller amounts from hydroelectricity (13 percent) and other renewables (4 percent). Electricity imports made up for the countrys supply shortfalls, and according to Eurostat, the largest sources of these imports in 2003 were Switzerland (51 percent), France (35 percent), and Slovenia (9 percent). Italy began liberalizing its electricity sector in 1999, initially allowing only large customers to choose their own supplier. Liberalization has now spread to the majority of the retail market. As part of the liberalization, the Italian government began to privatize Enel, the former, state-owned power monopoly that previously controlled all aspects of the electricity sector. In 2000, the Italian government forced Enel to sell 27 percent of its generating capacity, and to that end, Enel created three new, independent companies: Elettrogen, Eurogen, and Interpower. Along with removing Enels monopoly on electricity generation, distribution, and transmission, the Italian government began to divest its holdings in the company: as of April 2006, the government held 31 percent of the companys shares.
Terna owns the electricity transmission grid in Italy. The company was previously a wholly-owned subsidiary of Enel, but Enel has reduced its holdings in the company in order to satisfy Italys energy liberalization goals: in 2005, Enel only held 5 percent of the shares of Terna. While Enel remains the dominant generator and distributor of electricity in Italy, other companies have emerged as significant players in the sector. The most important of these include Edison, Enipower, Acea, Energia Italia, Spains Endesa, and Belgiums Electrabel. Many of these companies have extended their market share by purchasing the former assets of Enel: subsequent to the Enel divesture in 2000 discussed above, Endesa Italia purchased Elettrogen; Edison purchased Eurogen; and a consortium of Belgiums Electrabel, Italys Acea, and Italys Energia Italia purchased Interpower, rebranding it Tirreno Power. In the summer and early fall of 2003, Italy experienced two significant power blackouts. The first occurred on June 26, 2003, when supply was unable to meet a surge in power demand as the result of increased air conditioning use during an extreme heat wave. On September 28, 2003, all of Italy, except Sardinia, experienced a second blackout, when a tree struck a power transmission pylon in Switzerland. Although it appeared that these blackouts were caused by temporary or incidental factors, many analysts have suggested that the root of the cause lies in under-investment in Italys power sector, which has resulted in less than sufficient reserve generation capacity and increased dependence on electricity imports. In response to the power crisis, the Italian government eased regulations on building new power plants and sought to encourage greater investment in the electricity sector. There have been reoccurring disputes between Italy and France concerning the liberalization of their respective electricity sectors. Italy has implemented most EU requirements relatively quickly, whereas France has been one of the slowest countries to adopt these changes. The dispute surrounding Electricite de Frances purchase of a stake in Italys Edison was only resolved after the French government agreed to allow Enel to invest in the French electricity sector. In 2006, the French government objected to Enels purchase of Frances Suez, engineering a merger between Suez and state-controlled Gaz de France to stave off the acquisition.
As mentioned above, Italy gets the majority of its electricity supply from conventional thermal sources, the bulk of which are oil-fired. The high cost of oil compared to other sources of thermal generation has caused Italian electricity consumers to pay some of the highest rates in Europe. In response, power generators have begun to switch to alternative fuel sources, especially natural gas and co-firing plants burning combinations of oil, natural gas, and coal. Enel has announced that it would like to phase out all oil-fired power plants by 2008, though the current tightness of Italys electricity supply raises questions about the feasibility of this plan. Most new investment in electricity generating capacity in Italy has been in the form of gas-fired plants, specifically combined-cycle, gas-fired turbines (CCGFTs). In October 2005, Germanys E.ON announced that it would build a 800-MW CCGFT in Livorno. Also in 2005, Linate airport in Milan awarded a contract for the construction of a 24-MW, gas-fired cogeneration plant to supply electricity and heating. In 2004, Electrabel began construction of a 400-MW CCGFT in Rosignano. Eni power completed gas-fired power plants in Ravenna (780 MW) and Ferrera Erbognone (1,030 MW) in 2004; the company is also in the process of building plants gas-fired plants in Mantua (780 MW) and Brindisi (1,170 MW). Energia Italiana plans to build at least five new plants in Italy, each with a capacity of 780 MW and burning combinations of natural gas and coal. In 2004, Endesa spent some $690 million to convert several oil-fired plants into gas- or coal-fired.
Prompted by the 1986 Chernobyl incident, Italy banned nuclear power generation in a 1987 referendum. In light of Italys recent blackouts and its domestic supply crunch, some domestic leaders have suggested the restarting of the four existing plants in the country. However, Sogin, the state-owned company responsible for the plants, has stated that such a proposal is unrealistic, due to the age and condition of the facilities. Italy already imports electricity directly from a Slovenian nuclear power plant 60 miles from the Italian city of Trieste.
Italy has begun to push renewable energy sources as a way to increase its generating capacity, reduce its reliance on oil-fired plants, and decrease its carbon dioxide emissions. Enel announced in 2005 that it would build 71 wind turbines throughout the country, each generating 1.5 MW of electricity. Endesa is also considering the construction of a wind farm on the island of Sardinia. According to Enel, Italy is the fifth-largest producer of wind energy in the world, though the country does not have the same natural advantage for wind power as northern European countries such as Germany, Denmark, and the United Kingdom. Italy does have one of the largest potentials for solar energy in Europe. Under a government program implemented in late 2005, surplus solar energy generated by residential and commercial installations can be sold back to the grid for three-times the average rate of regular electric power.
Italys most promising source of renewable electricity generation could be geothermal. The first-ever geothermal power generation took place in Larderello, Tuscany at the beginning of the 20th century. According to the International Geothermal Association (IGA), Italy has the fourth-largest installed geothermal capacity in the world (795 MW), and country has some 94 percent of the total geothermal electricity capacity in the EU. Analysts estimate that Italy could have the largest, per-capita geothermal potential in the world.