(Finance) – The rDistribution network plays a key role to enable the energy transition. They therefore make necessary investmentsto allow the network to manage the change in the electrical system structure and cope with climate change. This is what emerges from the Study “IThe role of electricity distribution for a safe energy transition” made by TEHA in collaboration with Enel anticipated today, as part of the 50th edition of the Forum “Today and Tomorrow’s Scenario for Competitive Strategies” Of The European House – Ambrosettiin a press conference attended by Lorenzo TavazziSenior Partner and Board Member of The European House – Ambrosetti and TEHA Group, Gianni-Victor ArmaniDirector of Enel Grids and Innovability of Enel and Guido BortoniPresident of CESI, former Head of the Energy Department of the Italian Government and former President of ARERA.
“In light of the changes taking place in the electricity system and those required to achieve decarbonisation, the consolidation and development of the distribution network as an essential means to enable this evolution is in fact at the heart of the current energy debate. To support this new important phase of development of the distribution network through invested capital and innovation, it is necessary to ensure a continuous structure that allows financial stability and sustainable management for distribution network operators”, he commented. Gianni Vittorio Armani, Director Enel Grids and Innovability of Enel.
“The progressive increase in distributed generation from renewable sources and the greater electrification of final consumption require that the electricity distribution network is adequate and enables a “seamless” transition”, he commented. Lorenzo Tavazzi, Senior Partner and Board Member of The European House – Ambrosetti and TEHA Group. “The evolution of the electricity system and the role of distribution require new significant investments in the network to ensure continuity of performance: in Italy, over the next 10 years, approximately 6 billion Euros of investments per year will be planned, which could activate significant direct, indirect and induced impacts on the country’s economy”.
According to the European Commissionto achieve the 2050 decarbonisation targets, the European Union will have to double the annual rate of installation of renewable energy sources (RES)compared to the average of the last 5 years, largely in the electric vector that will have to cover 60% of European final consumption. The impressive growth of RES distributed throughout the territory and the greater electrification of final consumption in terms of volumes require a new development of the distribution network as an essential means to enable this evolution.
It is no coincidence, therefore, that the Net Zero Industry Act (NZIA) of the European Commission has identified the Power grid as a strategic technology to achieve net zero emissions by 2050. The European Commission itself has also recently highlighted the importance and strategic nature of the electricity distribution network (EU Directive 2022/2557), identifying this sector as essential for maintaining vital functions of society and critical for the correct functioning of productive economic activities.
In Italy, the strategic importance of the electricity grid is confirmed by its presence in the list of strategic infrastructures defined by the Golden Power, in a context in which more than 80% of the electricity consumed in Italy is supplied by the distribution network. The electricity distribution network is, moreover, an essential service not only for the maintenance of vital functions for society (serving more than 30 million domestic users), but also and above all for economic activities, with 7 million connected commercial and industrial users.
In more detail, in Italy the electricity distribution network has a key role in enabling the energy transition both for the growing connection of distributed plants (over 70% of the additional renewable capacity to be installed by 2030 in Italy will in fact be connected to the distribution network) and for the increasingly active role of end consumers in the electricity system, who become prosumers and promoters of innovative “activities”. These two dynamics – distributed generation and the increasingly active role of end consumers – highlight the strategic nature of the infrastructure: In 2023, over 370 thousand connections were made in Italy, 7 times the number recorded 10 years ago, proving the importance that decentralized electricity generation is assuming, with relatively smaller energy production plants and closer to end consumers.
Distribution must therefore be adapted to these new needs dictated by the change in the structure of the electrical system. In fact, if in the traditional structure of the sector, electricity followed a one-way flow with end consumers playing a passive role, the modern electrical network, on the contrary, must be able to cope with – in addition to having a growing number of distributed electricity generation sources, with bi-directional electricity flows and increasingly active end consumers.
The topic, therefore, is at the center of the debate not only for this change in the structure of the electrical system, but also for the climate changes underway. In fact, extreme weather phenomena can cause significant damage to electrical infrastructures, with repercussions on the production system and the community. In order to guarantee constant reliability of the electrical service, it is therefore Investments needed to increase the resilience of the distribution network in the next few years.
An assessment of the future of electricity distribution in Italy and Europe cannot ignore the relative analysis of current performance. Starting from these considerations, TEHA has set itself the objective of identifying the salient characteristics of the performance of the distribution network in Italycomparing it with other benchmark countries in Europe. From the analytical evaluation model developed, it emerges that the Italian distribution network (understood in its current structure) is among the most virtuous in Europethanks to an effective development of invested capital that has enabled high rates of innovation, efficiency and infrastructural development. In particular, the Italian network is 1st for cost-effectiveness of network charges and for the penetration rate and functionality of smart meters.
The efficiency, effectiveness, economy and innovation of the distribution sector have been supported by a multi-level, advanced and particularly network-friendly regulatory system.
However, the evolution of the electrical system and the role of distribution require new significant investments in the network to ensure continuity of performance. In Italy, over the next 10 years, approximately 6 billion euros of investments per yearwith consequent important benefits for the country system. In fact, the average annual investments expected in the electricity distribution network in Italy could generate over 13 billion euros of added value in the system each year, approximately 0.7% of the Italian GDP, enabling over 170 thousand jobs and guaranteeing over 12 billion Euros of income for Italian families.
In light of the current performance of the distribution sector in Italy, which is substantiated in investment capacity and effectiveness, quality of service, innovation and cost-effectiveness for end users, it is hoped that, starting from the current structure, future evolution will preserve and enhance, in a long-term perspective, the important benefits guaranteed so far by a regulatory-legislative system.
It is therefore necessary that the prospective evolution of the normative-regulatory system does not constitute, in the second half of the current decade, a brake on the investments that the evolution of the network requires.