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Italy could lose 4-5GW of thermal electricity capacity within 18 months

22 Jul 2013 14:53:00 | edem

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High renewable generation and ongoing poor demand are forcing utilities to mothball or close fossil-fuelled plants in Italy during the next 18 months, according to industry sources.

A spokesman from electricity industry association Assoelettrica estimated that 4-5GW of fossil-fuelled capacity could go offline, with Italian incumbent Enel, A2A, E.ON Italia and GDF Italia all considering closing or mothballing plants by the end of this year and the start of 2014.

Economy minister Claudio De Vincenti told parliament earlier this month that 2GW of fossil-fuelled power plants would close in Italy in 2013 and 2014.

De Vincenti highlighted the case of Enel's 700MW thermoelectric power plant, Trino Galileo Ferraris, which will be closed by the end of this year or the beginning of 2014.

He added that other operators had already asked Italian grid operator Terna for permission to close or mothball plants as well.

A2A, GDF Italia and E.ON Italia did not confirm that they were mothballing or closing plants.

Enel may close more than Trino

A spokesman from Enel said the Trino plant had become uncompetitive on the electricity market because of its low plant efficiency, more renewable development and the decline in energy demand over time.

The Italian merit order gives grid priority to generation from renewable sources over fossil-fuelled generation (see EDEM 15 July 2013).

"The plant could potentially produce 6,000GWh of electricity per year but it has produced 0GWh in 2010, 41GWh in 2011, 10GWh in 2012 and so far 0GWh [in 2013]," the spokesman said.

He said that the group was evaluating closures on a case by case basis, but there was no specific schedule yet. "Enel's capacity in Italy may be reduced by 6GW by 2017," he said.

Enel's thermal generation capacity in Italy at the end of last year totalled 24.7GW, so these closures would total up to a quarter of the incumbent's generation there. However, as most of these plants are used as back-up, the spokesman said that closing them would not impact Enel's profitability.

Other closures planned

Terna says on its website that 12 plants representing 3.2GW were switched off in 2012. In 2013-14, five plants will be added to the list for a total capacity of 1.3GW (700MW in 2013 and 600MW in 2014).

Terna declined to say if the closure of Enel's plant had been accepted, or to confirm the minister's comments or whether other companies had requested closures. However, industry sources said this was likely.

Earlier this month, Terna stated that electricity demand for the first half of 2013 had fallen by 3.9% year on year. In June alone, demand totalled 25.8TWh, a 6.2% drop from the same period the previous year, although with temperature and calendar adjustments, the comparable demand fell by 5.2%. Month on month, seasonally adjusted demand was flat.

Gas-fired generation accounts for most of Italys thermal generation, and spark spreads have been in decline for some time. The clean spark spread for Winter 13 Baseload is less than half the previous front winters value, according to ICIS data. The clean spark spread for Winter 13 Baseload has averaged 4.14/MWh in the period from 1 April to Fridays close, compared with 10.05/MWh for Winter 12 Baseload averaged over the same period a year earlier.

Traders said closing these plants would not affect Italian wholesale prices, given the oversupply of electricity coming from renewables. Most of them are mothballed plants that hardly make any profits anyway, said a trader. Lucie Roux

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