Italy’s government is set to deliberate on an energy decree next week that could have significant implications for the country’s power sector and consumers. According to reports, the decree will include a €90 one-off bonus for some consumers, a reduction of older solar panel incentives, and a state-backed guarantee of up to €250 mn for power contracts longer than three years. Analyst Gonzalo Sanchez-Bordona has identified three key impacts of the decree:

• 1. Lower costs for gas generation: The decree could lead to lower wholesale prices and a negative impact on merchant generation, as the reduced incentives for solar panels could lead to a decrease in the demand for gas-fired power plants. This could result in lower profits for companies that rely on these plants for electricity production.
• 2. Change in cashflow profile for older solar projects: The decree could affect the residual value of older solar projects, as the reduced incentives could lead to a lower net present value. This could impact the financial performance of companies that invest in these projects.
• 3. Indirect incentive for demand: The decree could also create an indirect incentive for demand, as consumers may be more likely to use electricity if their bills are lower. This could lead to increased consumption and potentially strain the power grid during peak hours.

While the decree may have negative implications for some companies, analyst Gonzalo Sanchez-Bordona sees it as a positive development for consumers. He believes that the €90 one-off bonus will provide significant relief to low-income households and help reduce energy poverty in Italy. Additionally, the reduction of older solar panel incentives could lead to more efficient use of resources and a more sustainable power sector in the long run.