What has caused the price rises for electricity and gas? And how can renewable energy sources, together with the electrification of final consumption, bring greater benefits in terms of reducing the price of electricity?

In these videos we provide simple and immediate answers to the most frequently asked questions about the current energy scenario.

Why are energy bills rising?

The current increase in the cost of electricity is almost exclusively due to that in the price of gas, which in the last year has become extremely volatile, reaching peaks almost 20 times higher than what we were used to. This variation and volatility is largely attributable to the scarcity, or fear of such, that a lack of Russian gas is having on the gas trading markets.

Seeing as around 50% of electricity in Italy is produced from gas, there is a strong correlation between the price of gas and the price of electricity on the wholesale market (the PUN: Prezzo Unico Nazionale, National Single Price) and, consequently, on energy bills.

The increase in bills is particularly significant for customers in the protected categories market and for those who have signed contracts at a variable price, the rates of which follow the variation of the PUN. EE - Enel Energia, the Group’s company which operates on the controlled market, on the other hand, has managed to ensure (for those customers that have stipulated a fixed price contract) an electricity price in the bill equal to around 50% less than the market price.

In light of the fact that Italy imports approximately 90% of its gas, the solution to costly electricity bills is the introduction of a cap that limits the volatility of gas prices in all of Europe. This is in addition to the gradual reduction in gas use (especially piped gas) through the development of renewable energy plantsenergy efficiency and electrification (e.g., heat pumps) and the diversification of gas supply routes.

What is the TTF and what impact does it have on electricity bills?

TTF stands for Title Transfer Facility. This is the virtual trading point for natural gas in Europe. It has been in operation since 2003, is based in the Netherlands and is a strategic and physical hub for the transfer of gas between Europe’s largest countries.

The TTF is where gas is traded between the major operators and traders in the sector – producers and suppliers – that buy and sell methane gas. The price is determined by the classic supply-demand relationship. Rising demand drives the price up and the post-pandemic economic recovery in many European countries has created an initial effect. On the other hand, the reduction in supply from Russia, which was caused by geopolitical tensions, has pushed prices up further.

In the last year the TTF Index has become extremely volatile, reaching peaks that do not reflect the genuine cost of gas.

In Italy the price of electricity is still closely related to the price of gas, in spite of the fact that a substantial share of electricity is produced from renewable sources.

For these reasons, therefore, the increase in the TTF has had a significant impact on electricity bills.


What is the PUN and how does gas affect the price of electricity?

The Single National Price (abbreviated PUN in Italian) is the hourly wholesale reference price of electricity purchased on the Day-Ahead Market (abbreviated MGP in Italian), i.e. the market in which, one day in advance of the delivery of electricity, energy is exchanged for each hour of the following day.

The PUN represents the national weighted average of electricity sale prices for each hour and for each day in the different areas of Italy and its value is determined hour by hour based on the energy demand and supply of the various producers; it consists of a mix of technologies (hydroelectric, photovoltaic, gas, coal, etc.) ranked from the cheapest to the most expensive.

The price of the marginal technology – that is, the last (and most expensive) necessary to cover the demand at that specific time – is applied to all energy exchanged on this market. Due to the production mix in Italy, today gas is the marginal technology for about 50% of the hours, and therefore has an important impact on the price of electricity.

By increasing the share of electricity produced from renewable sources, we can reduce the number of hours in which gas is marginal and limit the impact of its price on the PUN.

The fluctuations of the PUN are a determining factor in calculating the final energy costs on utility bills. In fact, in the periods in which the PUN increases its value, costs tend to rise, and they go down when the value of the PUN decreases.

The value of the PUN is published and updated daily on the website of the Gestore dei Mercati Energetici.

What are the measures to support consumers?

Our Group is enacting government and regulatory measures to reduce the costs of electricity and natural gas for consumers, beginning with the most vulnerable groups and with businesses. The measures include the electricity and gas social bonus for families that are experiencing financial or physical hardship, the tax credit for businesses introduced in the D.L Aiuti (“Help Decree”) legislation and the possibility to pay invoices in installments. In addition to the government’s measures, Enel Energia has introduced the possibility to pay invoices issued from January 2022 onwards in installments without any initial deposit, with a minimum interest rate in up to 12 equal monthly payments, allowing our customers to chose the solution that best suits their needs.

Have the increases generated extra profits for the Enel Group?

No, the current increases in bills have not generated extra profits for our Group. Enel Energia sells energy to its own customers well in advance of the delivery date, ensuring for those customers who have stipulated a fixed price, a bill price of the energy component and the raw material gas that is significantly lower than market prices. This energy is derived mainly from three sources: production from renewable energy plants, production from thermoelectric plants, and purchases on the energy market. Of these three, only the first has remained immune from the effects of the rising price of gas, while the other two have seen an increase in the supply of energy for our Group.

Why can renewables be the solution?

The development of renewables is a solution to high utility bills, because it makes Italy more energy independent, by decreasing the import of fuels and gas in particular. A greater production of energy from renewable sources brings numerous benefits in economic, environmental and social terms.

Starting with a reduction in the price of electricity. Italy has already been on this path for some time: if we had not started ten years ago, today's increase in the price of electricity would be 10-15% higher.                              

Currently, over 55% of our total managed capacity in Italy – a total of approximately 14,600 MW – is already made up of renewable plants, divided between hydroelectric, geothermal, wind and photovoltaic.

Reducing the use of fossil fuels in favour of renewables means accelerating the energy transition, responding to the challenges of climate change and ensuring sustainable development and equal access to energy.

For this reason, we are committed to the development of numerous projects, both for the construction of new renewable plants and for the repowering (increasing the efficiency and power) of existing ones.

What are the benefits of the electrification of consumption?

The electrification of final consumption, or the progressive use of electricity from renewable sources in services and activities which, until now, have been mainly powered by fossil fuels, is a key factor for the energy independence of our country, bringing environmental, economic and social benefits. Electricity can be generated from renewable sources with zero emissions: it is a high-performance energy carrier and is therefore the most efficient energy solution.

What does the energy transition mean?

The energy transition is the shift from the use of fossil fuels to energy produced from renewable sources, which goes hand in hand with a notable reduction in emissions and an increase in efficiency. This revolution is now irreversible and involves all aspects and stakeholders in the energy system.

Our Group is driving this change, putting sustainability at the center of all our activities with the aim of shaping a business model based on the development of renewables, upgrading the electricity grids and creating a new energy paradigm.