From crisis to reform: Italy's power market evolution (and what's next)

Italy's electricity market has been on an extraordinary rollercoaster over the past two years, propelled from niche industry talk straight into everyday headlines. Between skyrocketing electricity bills and urgent debates on renewable energy, Italians discovered the power market matters—not just to traders and analysts, but to households facing unprecedented bills.

As we approach Montel’s Italian Energy Day, it's the perfect moment to reflect on this dramatic evolution and explore how market reforms and renewable strategies are shaping Italy’s future.

A year of crisis: From headlines to households

Early February 2025 saw a proper winter return to Europe, with above-average heating demand across major European power markets. In Germany (the biggest power market in the EU), this translated into elevated gas-to-power generation and system-wide strain. EU gas storage levels fell to 34% by the end of March, underscoring the sustained draw on reserves due to heating and power generation.

The term "caro bollette" became Italy’s unofficial phrase of 2022 and 2023. Energy prices exploded, driven by soaring gas costs and reduced hydroelectric output due to drought, with wholesale power prices averaging a staggering €543/MWh in August 2022. National newspapers and nightly newscasts transformed energy economics into urgent public discourse. Italy found itself at the heart of a perfect storm—dependence on gas imports, geopolitical upheaval, and climate disruptions combined to expose structural vulnerabilities.

Media highlighted the record price spikes daily, causing policymakers to scramble to alleviate consumer pain through subsidies totalling over €21 billion in 2023 alone. As households watched their bills skyrocket, the focus shifted from shock to solutions, urging systemic reform and energy independence.

Riding the market rollercoaster: A push for reforms

As prices gradually stabilised through 2023 and into early 2024, debates intensified around EU-led reforms to decouple power prices from volatile gas markets. Italian regulators moved forward with the TIDE reform, introducing 15-minute market settlement periods starting 2025, designed to improve renewable integration and market flexibility.

Meanwhile, the imminent end of the regulated tariff ('mercato tutelato') stirred discussions, highlighting a turning point toward full market liberalization. Industry experts underscored the urgency of creating a stable, resilient market less susceptible to price shocks.

Accelerating renewables and the analytics revolution

Renewables surged into the spotlight as a practical solution to price volatility and energy dependence. Italy significantly increased renewable capacity—adding around 6 GW in 2023 alone—to cover over 36% of electricity demand. Yet the growth highlighted persistent permitting bottlenecks and grid challenges.

Interestingly, the crisis also boosted the role of data analytics in energy discussions. Analysts gained prominence through engaging data-driven insights shared via social media,  explaining market complexities to broader audiences. Commentary illustrated how improved forecasting tools, data analytics, and storage systems could stabilize Italy’s electricity future.

Analysis tries to bridge the gap between technical insights and public understanding through regular, highly-engaged posts on LinkedIn and Twitter. Hashtags like #carobollette and #rinnovabili drove discussions well beyond industry circles, influencing public perceptions and even shaping policy responses.

Italy’s import dependence

Italy depends on imports to satisfy its electricity demand. There are large differences inside the country with power flowing from South to North on sunny days and power flowing from North to South if prices in other European countries are lower, but the net position of Italy versus the surrounding countries is importing. This import dependence and the high sensitivity to gas prices combine into a political movement to develop nuclear power in Italy. Adding a significant baseload would indeed reduce the import and gas dependence, however adding large generation capacity would be very location critical.

Considering the shape of Italy, a narrow country, getting the power to where it needs to be, could be challenging. Italy has also recently approved new renewable incentives, which should give solar and wind development a boost, especially since capture prices in the rest of Europe are under much pressure.

Grid development needed

It is crucial that the Italian grid keeps pace with whatever direction prevails. Centralised generation versus distributed renewables impact the need for grid investment of different types. To prevent a major blackout, like we’ve recently seen in Spain and Portugal, the Italian policy makers need to look ahead. Developing renewables or introducing new dependencies (on large generation sites), could impact the level of inertia in the grid. With Italy’s geography being the way it is, that could make it more vulnerable to outages and frequency events.

With considerable volumes of gas generation and imports from the synchronous European grid, it looks like sufficient inertia is available to provide grid resilience, but there may be parts of the country that are more prone to a high non-synchronous generation and therefore at risk of instability.

Outlook: Italy's power market beyond the crisis

As Italy moves beyond crisis management towards structural reforms, key questions remain about long-term strategies. Will new market mechanisms finally start to decouple Italy’s power prices from volatile fossil fuels? Can advanced analytics, better forecasting, and storage solutions help to stabilize markets? And crucially, will Italy's ambitious renewable goals reduce vulnerability to future shocks?

One thing is clear: the dramatic events of the past two years have permanently altered public and media engagement with Italy's electricity markets. The upcoming Montel Italian Energy Day promises further expert insights, shedding more light on the journey ahead, from crisis recovery to a resilient, sustainable energy future.