Italy’s distribution grid needs €6bn/year over next decade

Italy’s distribution grid needs annual investment around €6 billion (US$5.4 billion) over the next 10 years to ensure continuity of performance, new analysis for Enel has found.

The review, undertaken with The European House Ambrosetti (TEHA), found that the Italian distribution grid – in its current set-up – is among the most virtuous in Europe, thanks to effective development of invested capital that has enabled high rates of innovation, efficiency and infrastructure development.

Specifically, compared with the other ‘Big 5’ countries comparable in terms of economic-social size and electricity distribution management model – i.e. Germany, France, Spain and UK – Italy’s distribution grid ranks first for its investment capacity, its smart meter penetration rate (as a proxy for innovation) and its cost effectiveness of distribution charges and while first for its coverage of mountainous terrain, second (to Germany) for its territorial coverage.

This is attributed to being supported by a multi-level integrated legislative regulatory framework that is particularly well-suited for the grids.

Have you read?
Global grids investment starting to pick up – IEA
The transformative role of AI in electricity grids

Elements include an independent and stable regulatory body providing a congruent and stable investment remuneration system, regulatory incentive mechanisms aimed at efficiency and elements of legislative regulatory protection for consumers, along with widespread and innovative metering systems and data transparency and continuous monitoring.

In the light of this current performance, it is desirable that future development should preserve and enhance the important benefits guaranteed so far by the legislative and regulatory system.

Thus, it is necessary that the prospective evolution of the legislative and regulatory framework does not, in the second half of this decade, restrain the investments required to evolve the grid, state Enel and TEHA in the study.

“In light of the changes taking place in the electricity system and those required to achieve decarbonisation, the consolidation and development of the distribution grid as an essential mean of enabling this evolution is indeed at the heart of the current energy debate,” commented Gianni Vittorio Armani, director of Enel Grids and Innovability at Enel.

“To support this major new phase in the development of the distribution grid through invested capital and innovation, it is necessary to ensure a coherent set-up that allows financial stability and sustainable management for distribution grid operators.”

Distribution key in energy transition

In Italy, the distribution grid connects more than 30 million households and seven million commercial and industrial users and supplies more than 80% of the electricity consumed.

As such it plays a key role to enable the energy transition both for the increasing connection of distributed plants, with over 70% of the additional renewable capacity to be installed by 2030 at the distribution level, and for the increasingly active role of end consumers in the electricity system.

In 2023, for example, over 370,000 connections were made, seven times the number recorded 10 years previously, demonstrating the importance of decentralised electricity generation, with relatively smaller power generation facilities closer to end consumers.

Investments in Italy’s distribution grid have more than doubled from €1.8 billion ($2 billion) in 2018 to €3.7 billion ($4.1 billion) in 2023 and are forecast to reach approximately €4.7 billion ($5.2 billion) in 2024.

They must therefore by increase by more than the same amount again to reach €6 billion ($6.6 billion) in 2025 and subsequently, with the focus on demand side management, digitalisation, resilience to climate change, the integration of distributed generation and smart meters.

These investments are then expected to generate over €13 billion ($14.4 billion) of added value in the system every year, about 0.7% of Italian GDP, creating over 170,000 jobs and guaranteeing over €12 billion ($13.3 billion) of income for Italian families, Enel and TEHA estimate.