The Italian electricity system

The Italian electricity system is preparing for one of the most significant transformations in recent years. In his first annual report as president of Arera, Nicola Dell'Acqua outlined the main directions for the Authority's actions in the coming four years, highlighting the gradual phase-out of the National Single Price (Pun), the introduction of zonal prices, increased flexibility of the grid, and a more efficient use of existing infrastructure.

According to Arera, the Italian energy system continues to suffer from a strong dependence on natural gas and international geopolitical tensions, factors that maintain high volatility in energy prices and directly reflect on the bills of families and businesses. In 2025, the average Pun stood at 115.9 euros/MWh, up 7% from the previous year and significantly higher than the levels recorded in major European markets like France and Spain. For the Authority, one of the main causes remains the significant share of national electricity production still based on natural gas.

Zonal prices to enhance renewables

Among the most relevant interventions is the gradual transition from the National Single Price to zonal prices for electricity, a reform previously anticipated but so far unfinished. The current system applies an average national price regardless of the geographical area where electricity is produced. This mechanism simplifies the market and mitigates price fluctuations but also reduces the economic incentives for regions hosting large renewable plants.

With the new model, the price of energy would instead reflect local production and grid conditions. Areas characterized by high availability of renewable energy and lower infrastructure congestion could benefit from lower prices, while zones more dependent on thermoelectric generation or imports might see higher values. The goal is to bring the Italian market closer to European standards and provide more effective economic signals to both consumers and investors, further incentivizing the development of photovoltaic and wind plants.

Protests from Southern regions

The delay in the introduction of zonal prices has fueled discontent among some regional administrations, particularly in the South, where significant new investments in renewable sources have concentrated in recent years. Among the most critical is the President of Calabria, Roberto Occhiuto, who has recently pressured Arera to accelerate the implementation of the reform. According to the governor, regions that produce more energy from renewable sources should benefit from lower bills for citizens and businesses, compensating for the territorial impact caused by the presence of large plants.

More controls on the markets and less dependence on gas

Arera also intends to strengthen the monitoring of the electricity market through a new energy oversight unit tasked with real-time tracking of wholesale and retail price trends, with daily updates destined for the government, parliament, and European institutions. Simultaneously, the Authority aims to develop tools that reduce the linkage between electricity prices and natural gas prices, one of the main elements keeping Italian prices high compared to the rest of Europe. This same strategy is supported by associations in the energy sector, which emphasize that greater diffusion of renewable sources is one of the main tools to decrease import dependence and increase the competitiveness of the national production system.

Smarter grids and reforming connections

Another pillar of the strategy concerns the evolution of electrical infrastructures. The increase in distributed generation and the growth of renewable plants necessitate updating the rules for grid connections. Arera intends to prepare a single text that standardizes regulations for producers and final customers and introduces tools to counteract the so-called "virtual saturation," a phenomenon that occurs when immature connection requests occupy available capacity without actually leading to the establishment of plants. The aim is to promote projects that are genuinely ready to be built, preventing speculative bookings from slowing down network development. Before proceeding with new infrastructures, the Authority also proposes a more efficient use of existing ones through so-called grid-enhancing technologies—advanced systems for monitoring and dynamically managing electric flows—and non-wire solutions, which include energy storage, demand management, flexibility services, and digital tools capable of reducing congestion without immediately resorting to building new lines.

Investments yes, but without burdening bills

In outlining future regulation, Dell'Acqua reiterated that investments must be supported while avoiding transferring unjustified costs to consumers. In this light, the revision of the WACC (Weighted Average Cost of Capital), used to determine the remuneration of invested capital in infrastructures, and the RORE (Return on Regulatory Equity), an indicator measuring the effective return on regulated companies' equity, play a central role. The Authority has also excluded any automatic tariff recognition for potential extraordinary investment plans presented by electricity distributors.

Hydrogen and CO2 transport among new competencies

Finally, the report dedicates space to the new sectors of the energy transition. The government is indeed close to completing the decree that will assign Arera the role of national authority responsible for regulating the hydrogen market. This function may also include oversight of networks dedicated to the transport and storage of CO2, currently only temporarily regulated. According to Dell'Acqua, hydrogen can contribute to the decarbonization of the most challenging industrial sectors to electrify and promote the integration of non-programmable renewable sources. However, the gradual phase-out of natural gas must occur while maintaining high safety standards for supply, deemed essential to ensure the stability of the national energy system.