Italy's regulator sets 2030 target to complete zonal power pricing as gas dominates market

Italy's regulator sets 2030 target to complete zonal power pricing as gas dominates market Gas-fired plants set Italian power prices in nearly nine in ten hours this year, making the regulator's push to restructure the market one of Europe's most consequential energy policy decisions. Italy's energy regulator has set a 2030 completion target for a shift to zonal power pricing, a structural overhaul of one of Europe's most gas-dependent electricity markets. Gas turbines set the clearing price in 89% of Italian power market hours so far in 2026, according to calculations by think-tank Ember. In Spain, gas set the price in 15% of hours over the same period. Italy's average power price in March 2026 was €142 per MWh, Ember data show, compared with €59 in Spain — a gap that reflects grid constraints, limited interconnection and persistent gas reliance more than any short-term fuel cost shock.³ Zonal pricing would replace Italy's current single national bidding zone with locational price signals, directing investment to congested nodes and allowing generators in constrained regions to receive differentiated returns. Italy has operated as a single zone despite significant north-south transmission bottlenecks for years. The shift would require alignment with European grid rules and regulatory approval at both national and EU level, making the four-year timeline ambitious rather than assured.³ The regulator has simultaneously begun work on a compensation mechanism for gas-fired plants facing elevated network costs, pending European Commission approval, Montel reported. The proposed scheme would compensate generators for part of those costs — an acknowledgement that gas plants remain the margin-setter of last resort while the grid adapts to higher renewables penetration. Whether EC approval arrives before the zonal redesign is in place will determine how exposed gas operators remain during the transition.⁴ The pressure on grid capacity is growing from a new direction. Italy's data centre industry is expected to quadruple its power demand to 20 TWh by 2030, driven by artificial intelligence investment, consultancy Key to Energy warned Montel on Thursday (2026-05-21). With up to €60 billion set to flow into the Italian data centre sector as part of a European surge exceeding €100 billion, connection delays were already emerging as the primary risk in the north as of that month. Without faster grid development or clearer locational pricing signals, analysts told Montel, the investment could shift to Spain or eastern Europe.¹ Analysts told Montel during the week of 2026-05-18 that Italy is unlikely to see widespread negative power prices before 2030 despite regulatory changes permitting them. The combination of insufficient storage, limited interconnection and gas dependence keeps price floors in place even at moments of peak renewables output. That limits the natural pressure on gas generators and leaves the market reform carrying more weight.² Battery storage offers a partial offset. Solar Power Europe argued during the week of 2026-04-06 that scaling up battery deployment could significantly reduce Italy's gas reliance by 2030, a case sharpened by supply disruptions stemming from the Iran conflict. European battery storage installations added 36 gigawatt-hours of new capacity in 2025, with the SolarPower Europe association projecting the market to quadruple through 2030 as utility-scale projects take the lead, according to a report published on Tuesday (2026-06-23).^5,6 Fixed network and system costs now account for around 20% of Italian household electricity bills, according to Christoph Maurer of consultancy Consentec. "We are transforming the system from variable fuel costs to largely fixed costs," Maurer said. Zonal pricing is intended to make those fixed costs work harder by matching investment signals to where congestion actually sits.³ The 2030 deadline is tight. Market redesigns of this scope typically require years of methodology work, stakeholder consultation and approval at multiple regulatory levels. Italy will need to move faster on grid permitting than it has historically managed, while simultaneously steering the gas compensation scheme through Brussels. The pace of data centre connection approvals in the north will be an early indicator of whether the grid investment can keep pace.^1,4