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Italy's Gas Plan: So Far So Good, But Government Focus is Uncertain

The government has unveiled a credible plan that aims to make Italy fully independent from Russian gas in 2025. This does not fully eliminate near term risks and the plan may be subject to delays, whether due to the possibility of a wavering political commitment, administrative challenges or other potential obstacles. Waiting for the EU authorities' upcoming decision on how to deal with the energy crisis, the Italian government so far has made progress in securing alternative sources to replace the fall in Russian gas supplies. Up to now, gas flows from other countries have compensated for the Russian gas supply reduction thanks to a proactive diversification strategy. This commentary focuses on how both Italy's long-term diversification plan, including energy savings, and yesterday's measures aimed at reducing gas consumption, are important: (1) to mitigate the risks coming from lower gas volumes, (2) to make Italy independent from Russian gas as rapidly as possible, and (3) to avoid the need for severe rationing in key industries and to limit the fall in gas storage levels for the 2023-2024 season.


Key Highlights
• The Italian government has made progress in securing alternative supplies.
• Strong government commitment and limiting administrative delays are key.
• Higher use of coal, lower heating and high tariffs coupled with an awareness campaign mitigate the risk of shortages of gas in key industrial sectors.

Italy’s progress in diversifying gas supplies is impressive so far. It remains to be seen if the political commitment can remain strong given the upcoming elections,” said Carlo Capuano, Senior Vice President Sovereign Ratings. “The full implementation of the gas plan is key to limit the risk of shortages, including in Italy’s industrial sector. Altering the culture of energy usage could be a powerful tool. Ultimately though, higher energy prices may turn out to be more convincing than the awareness campaign promoted by the government.”