Italy Readies Coal Plants as Energy Insurance: What Rising Gas Prices Mean for Your Bills

The Italian Ministry of Environment and Energy Security has established a clear threshold for reactivating the country's mothballed coal-fired power plants: if natural gas prices climb above €70 per megawatt-hour, the government will consider firing up these facilities to prevent energy shortages and price shocks. Currently trading around €40/MWh, gas prices remain well below the trigger point, but ongoing geopolitical turmoil in the Persian Gulf has officials preparing contingency plans.

Why This Matters:

• Energy costs are volatile: Gas prices have already jumped from early forecasts of €28-30/MWh to around €40/MWh amid the Iran conflict and Strait of Hormuz disruptions.

• Coal as emergency backup: Italy's four standby coal plants (totaling 4.7 GW capacity) remain available until 2038, providing a safety net if gas supplies tighten or prices surge.

• No return to Russian gas: Environment Minister Gilberto Pichetto Fratin ruled out resuming Russian gas purchases, aligning with EU policy despite supply pressures.

Coal Plants on Standby Until 2038

Italy postponed the permanent shutdown of its coal infrastructure by 13 years earlier this year, extending the deadline from 2025 to 2038. The decision, formalized through an amendment to the "Decreto Bollette" emergency energy law, reflects the government's determination to maintain strategic reserves amid a tumultuous energy landscape.

Two of the four remaining plants are located in Sardinia (the Sulcis/Portovesme facility operated by Enel and the Fiume Santo/Porto Torres plant run by EP Produzione), while the other two sit on the mainland at Brindisi Sud and Torrevaldaliga near Civitavecchia, both Enel assets. Together, they represent a combined installed capacity of approximately 4.7 GW, roughly equivalent to the output of a medium-sized nuclear station.

Pichetto Fratin, speaking at the "Holy Grail of Energy" conference in Milan, emphasized that reactivation would only occur under "emergency scenario conditions, not business as usual." He described coal as a "residual solution" but insisted the country must be prepared to deploy it if necessary. The €70/MWh threshold represents the economic break-even point where operating coal plants becomes more cost-effective than relying solely on imported gas, factoring in carbon emission allowances and operational expenses.

What This Means for Residents

For households and businesses across Italy, the coal contingency plan offers both reassurance and uncertainty. On one hand, it provides a buffer against extreme price spikes that could translate into crippling electricity bills—gas prices influence power costs disproportionately under the EU's marginal pricing system, even though gas accounts for only about 18-20% of Italy's electricity generation. On the other hand, prolonged coal use would increase carbon emissions and delay the country's clean energy transition, potentially exposing Italy to higher EU carbon quota costs and international criticism.

Italy imports roughly 75% of its natural gas, making it one of Europe's most vulnerable nations to supply disruptions. While national gas storage levels stood at a relatively healthy 43.4% capacity as of early April—above the EU average of 28%—a sustained cutoff from major suppliers or persistent high prices could drain reserves rapidly. The coal option essentially functions as an insurance policy against worst-case scenarios, such as a complete closure of the Strait of Hormuz or a harsh winter with record heating demand.

The government has ruled out returning to Russian gas, a position Pichetto Fratin reiterated firmly. "My personal position coincides with the Italian government's, which is perfectly aligned with the European Union," he stated. Any future reconsideration would require EU-level coordination, but for now, Italy continues diversifying its supply sources through liquefied natural gas (LNG) imports from Qatar, Algeria, and the United States.

Geopolitical Shadows Over Energy Markets

The minister's remarks came against a backdrop of escalating tensions in the Middle East, where the Strait of Hormuz—a chokepoint for roughly 20-21 million barrels per day of crude oil and petroleum products, plus approximately 20% of global LNG trade—has become a flashpoint. Iran's actions in response to U.S.-Israel strikes have severely disrupted maritime traffic through the strait since late February, with vessel movements slowing by an estimated 90% at peak disruption.

Pichetto Fratin expressed hope that "the Strait of Hormuz will reopen and that dialogue between the United States and Iran will resume to reach a point of equilibrium and peace." He acknowledged the day-to-day unpredictability gripping energy markets, noting that "we're truly living plot twist after plot twist, and it's difficult to predict what will happen in the coming days."

The crisis has already cost the European Union an estimated €2.5 billion in additional fossil fuel import expenses during the first ten days of intensified hostilities. For Italy, the impact manifests in multiple ways: higher gas and electricity prices, increased inflation, and pressure on industrial competitiveness. European gas benchmark prices (TTF) surged more than 70% in March alone, while Brent crude oil briefly topped $126 per barrel—levels not seen since the early months of the Russia-Ukraine war.

Renewable Transition Stalls Amid Crisis

Italy's coal contingency planning underscores the fragility of its energy transition. The country originally aimed to phase out coal by the end of 2025, with only a limited exception for Sardinia through 2026. The 13-year extension represents a significant retreat from those climate commitments, even if officials frame it as temporary and emergency-focused.

Under the Piano Nazionale Integrato Energia e Clima (PNIEC), Italy committed to achieving 39.4% renewable energy in final consumption by 2030, in line with the EU's RED III Directive. Yet as of 2025, renewables accounted for only about 20% of final energy consumption, far short of the 25% interim target. Fossil fuels still dominate, meeting roughly 70% of national energy needs.

Solar installations showed promise, with photovoltaic systems covering 41.1% of electricity demand in 2025, but overall renewable capacity additions actually declined last year, breaking a four-year growth streak. Bureaucratic bottlenecks and grid capacity constraints have stalled an estimated 70% of utility-scale renewable projects in the authorization pipeline. Regional differences compound the problem, as some authorities have adopted restrictive zoning criteria for wind and solar farms under the national "suitable areas" decree.

To meet its 2030 goals, Italy needs to install approximately 80 GW of new solar capacity—a monumental task that requires overcoming both administrative hurdles and infrastructure limitations. Meanwhile, natural gas consumption has actually increased, partly compensating for reduced hydroelectric output due to drought conditions and filling the gap left by delayed coal retirements.

Economic and Environmental Trade-offs

The coal reactivation scenario presents Italian policymakers with an uncomfortable trade-off. Operating these plants becomes economically viable only when gas prices climb significantly, but firing them up would increase carbon emissions at a time when the EU is tightening climate regulations. Italy would face higher costs for carbon emission allowances under the EU Emissions Trading System, potentially negating some of the financial benefits of switching from gas to coal.

Environmental groups and energy analysts have questioned the practical value of the 2038 extension, pointing out that coal plants were deemed "economically uncompetitive" even before the postponement decision. Critics argue that the infrastructure requires substantial maintenance investment to remain operational, and that the capital might be better deployed accelerating renewable capacity or expanding grid flexibility.

For households and small businesses, the immediate concern centers on electricity bills. Italy's retail power market remains sensitive to wholesale gas price fluctuations, meaning consumers feel the impact of Middle Eastern geopolitical shocks within weeks. The government has previously deployed emergency measures such as tax cuts, price caps, and subsidies to cushion these blows, but fiscal space for such interventions has narrowed following pandemic-era spending.

Path Forward

Pichetto Fratin's comments signal a pragmatic, if somewhat defensive, energy posture. Italy is betting that geopolitical tensions will ease, gas prices will stabilize below the €70/MWh threshold, and renewable capacity will expand fast enough to reduce fossil fuel dependence over time. The coal plants remain on standby—a strategic reserve that officials hope never to use but refuse to eliminate entirely.

The coming months will test this strategy. If the Strait of Hormuz remains disrupted or Iran escalates its maritime actions, global LNG markets could tighten further, pushing European gas prices toward or beyond the critical threshold. Alternatively, a diplomatic breakthrough or increased LNG shipments from alternative sources could ease pressure and keep the coal plants idle.

For residents, the key takeaway is straightforward: energy security comes with environmental costs, and Italy's path to decarbonization remains uneven. Investing in home solar installations, participating in Comunità Energetiche Rinnovabili (CER) cooperative projects, and supporting energy efficiency measures can help insulate households from price volatility while advancing the broader clean energy transition—even as the government keeps coal in its back pocket.