Italy to spend €3.8bn on limiting latest energy price hike

The Italian government is planning another intervention as energy bills are predicted to soar by up to 50 percent in January, local media reports.

A lit gas cooker ring.

Ministers have earmarked another one billion euros towards keeping household bills down, bringing the total sum to be spent in the new year to 3.8 billion euros, reports Italian news agency Ansa.

The move follows predictions that gas bills would rise by 50 percent in January without government intervention.

Electricity bills would also rise by between 17 and 25 percent, economic think tank Nomisma said.

In October the government allocated three billion euros to limit a similar hike in energy prices in Italy, where rates are revised every quarter.

Despite this, the consumer price of electricity rose by 28.9 percent and gas by 14.4 percent.

READ ALSO: Rising energy prices: How to save money on your bills in Italy

Nomisma Energia President Davide Tabarelli told Ansa that energy costs in Italy were now “out of control”.

Europe as a whole is facing soaring power prices as its economy recovers from the coronavirus pandemic, while natural gas reserves on the continent are at a worryingly low level.

Italy in particular relies heavily on imported gas: some 40 percent of Italy’s primary energy consumption is gas, compared with about 15 percent in neighbouring France, according to official statistics for both countries.

Tabarelli pointed to a reduction in the amount of gas delivered to Europe from Russia as one of the key causes of the crisis.

This is partly due to aging transportation networks, and partly to Moscow’s efforts to apply pressure on European governments to give the necessary approvals to open its Nord Stream 2 pipeline, the launch for which was pushed back by Germany’s energy regulator to at least March 2022, he said.

READ ALSO: Why Italy’s fuel prices are among the highest in Europe – and rising

He also highlighted a push by China and other countries to transition their main energy supply from coal to natural gas, increasing global demand on the energy source.

“Energy companies are investing more in renewables and less in fossil fuels, but the demand for gas isn’t decreasing,” Tabarelli said.

His concerns were echoed by Italian consumer rights group Consumerismo.

If prices rise as predicted, the group said, energy bills would cost the average family in Italy 3,368 euros in 2022 – 1,227 euros more than in 2021.

It recommended that the government allocate at least 10 billion euros “to counter increases and speculation on international energy markets”.

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How long will it take Italy to wean itself off Russian gas?

Italy's government has repeatedly said it plans to end its dependence on Russia for gas supplies following the invasion of Ukraine. But as the timeline keeps changing, when and how could this happen?

How long will it take Italy to wean itself off Russian gas?

Italy is heavily dependent on Russian gas, but has been seeking new sources since Moscow’s invasion of Ukraine as part of an effort to end this reliance in the coming years.

But it remains unclear whether Italy can really end its dependence on Russia for its gas supply – or when this might be feasible.

READ ALSO: What does Italy’s Algerian gas deal mean for energy supplies?

The government has been seeking new sources since Moscow’s invasion of Ukraine, including with a recent deal to boost supplies from Algeria.

Prime Minister Mario Draghi said last week the country could be independent of Russian gas by the second half of 2024 – the latest in a series of changing estimates.

“Government estimates indicate that we can make ourselves independent from Russian gas in the second half of 2024,” Draghi told the Senate, while adding that the “first effects” of this plan would be felt by the end of this year.

He said his government was also seeking to boost its production of renewable energy, including by “destroying bureaucratic barriers” to investment, saying it was the “only way” to free Italy from having to import fossil fuels.

Explained: Why and how Italy will pay for Russian gas in rubles

In April, Italy‘s Ecological Transition Minister Roberto Cingolani estimated the country would no longer need Russian gas within 18 months, following an earlier prediction that it could take until 2025.

Italy is one of Europe’s biggest users and importers of natural gas, importing 90 percent of its gas supply with 45 percent of that coming from Russia – up from 27 percent ten years ago.

Italy now imports 29 billion cubic metres of Russian gas a year, which Cingolani said in March “must be replaced” – but he didn’t specify with what.

Analysts have said there are “a lot of questions” about how helpful Italy’s gas deal with Algeria will be.

Despite its vast natural gas reserves, Algeria is already exporting at close to full capacity.

Draghi repeated his strong support for EU sanctions on Moscow last week, including a proposed ban on imports of Russian oil, although this is currently being blocked by Hungary.

“We must continue to keep up the pressure on Russia through sanctions, because we must bring Moscow to the negotiating table,” he said.

But for now, Italian energy giant Eni says it plans to pay for Russian gas supplies in rubles, meeting a demand from Vladimir Putin.

It was not immediately clear whether the plan would fall foul of European Union sanctions, although Eni said it was “not incompatible”.

The company said its decision to open the accounts was “taken in compliance with the current international sanctions framework” and that Italian authorities had been informed.