25/03/21
Low snowpack, rain may lift Italian summer power prices
Low snowpack, rain may lift Italian summer power prices
London, 21 March (Argus) — Low snowpack and hydro reserves in Italy may increase
the call on gas-fired power plants this summer, likely supporting power prices
in days when renewable generation is weakest. Hydro generation from run-of-river
installations, pumped-storage plants and hydroelectric reserves accounted for
almost 20pc of the power mix on average over 2020-24 in the third quarter — the
second-highest share after the second quarter at 22.2pc — compared with
gas-fired generation covering 45pc. But prevailing conditions suggest that
without unusually wet weather this summer, Italian rivers could be drier than
normal, limiting scope for hydro output and potentially opening more space for
gas in the power mix, driving up electricity prices. Snow water equivalent — or
the estimated water content of snow — moved back to a deficit to last year's
levels on 23 February after showing signs of improvement over the first three
weeks of the month, according to Italian meteorological association Cima.
Snowpack was at a deficit of 57pc to the 2011-23 average as of 8 March,
narrowing slightly compared with a 58pc deficit around the same time in
February. The deficit in the Po basin, which accounts for almost half of Italy's
snow water resource, is currently at a 44pc deficit to the seasonal norm, Cima
data show. In the Apennines, the Tiber basin is at a 95pc deficit to the
long-term average, marking the worst balance of the last 13 years. And hydro
reserves have been at a consistent deficit to last year since January and moved
to a deficit to the five-year norm in the middle of February. Rainfall in
Malpensa and Paganella, in the north of the country, was at an average deficit
of almost 2 mm/d and 1.6 mm/d, respectively, to the seasonal norm over November
and December last year. While precipitation picked up in January and moved to a
surplus to the norm of 1.9 mm/d in Malpensa and 1.4 mm/d in Paganella, minimum
temperatures were 1.6°C above the long-term average in Milan, reducing snow
accumulation. The latest data show that hydro reserves have picked up for the
first time this year in week 11, reaching 2.1TWh and narrowing their deficit to
the 2020-24 average to 0.8pc compared with 5.2pc a week earlier. Still, they
remain 6.6pc below last year, with the deficit standing even wider at 9.1pc,
when compared with the 2015-24 average. Looking ahead, forecasts indicate that
minimum temperatures in Milan will hold around 2°C above the 10-year norm until
the end of April, possibly leading some snowmelt to support run-of-river
generation early in the second quarter, when power demand is typically at its
lowest. But this would also leave less snow to melt later in the summer, when
cooling demand peaks and drives up overall demand for electricity. While solar
capacity increased steadily by over 500MW a month last year, the share of the
power mix covered by solar output in the third quarter of 2024 remained almost
unchanged from the same period in 2023. Assuming a similar monthly growth in
photovoltaic (PV) capacity this year, the solar load factor is expected to
increase by 1.8 percentage points to 17.8pc in the third quarter of 2025 on the
year. This means that even if solar capacity and output continue growing, it may
not be enough to offset a lack of hydro generation in the third quarter of this
year, and thermal generation may still need to cover a significant amount of
residual demand. The third quarter of 2025 has averaged €135.85/MWh
($146.83/MWh) so far this quarter, well above an average €91.60/MWh seen over
the same period last year. Clean spark spreads for 55pc-efficient gas-fired
units for the third quarter of 2025 have averaged around €19.60/MWh since the
start of the year, compared with an average of €15.50/MWh over the same time
last year. As solar and wind capacity is set to increase over the coming years
to reach a national target of 110GW by 2030, renewable output will cover an
increasing share of Italian electricity demand — estimated to reach 335TWh in
2028. Thermal plants may become less economically viable and will likely be
decommissioned unless they are kept operating through ancillary services. But
turning on gas-fired plants from cold and with a stop-start operation would lead
to exaggerated costs and higher maintenance prices, Argus heard on the sidelines
of the KEY25 Energy Transition Expo in Rimini earlier this month. This could
lead to electricity prices spiking in periods of scarce hydro availability, as
hydro-run-of river is Italy's largest single source of renewable generation,
accounting for 17pc of the power mix last year compared with less than 5pc of
hydro-pumped storage and reservoirs. By Ilenia Reale Italian hydro stocks TWh
Gas and hydro output, hydro reserves GW, TWh Send comments and request more
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