Italy’s electricity-to-gas price gap weakens the case for electrification

Electricity costs far exceed the European average

Italian businesses face an unusually unfavorable choice between electricity and gas. Companies pay €73/MWh for electricity and €29/MWh for gas, according to Ecoblog.it, giving Italy the highest electricity-to-gas price relationship in Europe. The corresponding European averages are about €41/MWh and €18/MWh. Italian industrial electricity therefore costs almost twice the regional benchmark, while gas is also more expensive.

The imbalance affects more than large energy-intensive plants. Confindustria has documented a persistent energy-cost disadvantage across consumption segments, including medium-sized manufacturers and industrial craft businesses. These companies compete with German, French and Spanish producers whose energy bills are significantly lower. Italian household gas prices are also around 7% above the eurozone average.

Gas-fired generation transmits costs to power

Italy’s generation mix is a central reason for the gap. A substantial share of domestic electricity continues to come from gas-fired plants, allowing natural-gas costs to feed directly into wholesale power prices. The impact is stronger than in countries with more diversified systems and larger contributions from nuclear power or renewables already integrated into their grids. During price spikes, Italian electricity reached €115.9/MWh, the highest level among the main European power exchanges, according to data cited from Arera.

Other constraints reinforce this exposure. Italy’s geography and limited interconnection capacity reduce its ability to import cheaper electricity when demand peaks or renewable output falls. Network tariffs, taxes and system charges have historically represented a relatively large part of final electricity bills. Although some charges have been reduced, their remaining effect is still significant.

Investment decisions favor continued gas use

Industrial decarbonization depends partly on replacing gas boilers with heat pumps, combustion furnaces with electric equipment, diesel vehicles with electric models and conventional thermal processes with resistance or induction systems. Such investments must be technically workable and economically competitive. With electricity costing much more than gas, Italian projects often have longer payback periods than equivalent investments elsewhere in Europe. Companies may consequently postpone electrification or retain existing gas equipment.

This weakens demand for electric industrial technologies and reduces incentives to invest in charging, distribution and grid infrastructure. Italy has added solar and wind capacity, but Ecoblog.it reports that grid integration is not yet sufficient to lower prices consistently during peak hours or periods of weak wind generation. As long as gas-fired plants remain the marginal technology setting spot-market prices, electricity costs will remain closely linked to gas.

Policy options require time

Reducing the disadvantage would require faster renewable deployment, stronger networks, greater interconnection capacity and changes to system charges. These are long-term measures rather than immediate relief for industrial consumers. In the meantime, the €73/MWh electricity price leaves Italian producers facing both higher operating costs and a weaker financial case for technologies intended to reduce fossil-fuel consumption.