Italy to Close 3.7 GW of Coal With Gas Compensation Scheme Still Awaiting Brussels
Montel's report of imminent coal closures puts Italy's gas generators on the hook for baseload supply before the regulator's relief mechanism clears the European Commission.
Italy is set to close around 3.7 gigawatts of coal-fired capacity on an "imminent" timeline, Montel reported on Wednesday (2026-08-05), a development that shifts the country's thermal baseload reliance toward gas at a moment when European gas prices remain elevated and the replacement supply picture is far from settled.6
ICE Endex TTF front-month stood at €55.92 per megawatt-hour in early European trade on Wednesday (2026-08-05). Italy's energy regulator Arera had already begun work on a scheme to compensate gas-fired plants for high fuel costs, but that mechanism was still pending European Commission approval as of Montel's May 21 (2026-05-21) reporting. Closing the coal fleet raises the dispatch burden on precisely the generators the regulator was already trying to cushion, before the cushion is in place.1
The wider European and global context has been pointing the other way. BIMCO data from the week of May 11 (2026-05-11) showed coal shipments to South Korea, Japan and the European Union surging 27% year-on-year, as buyers scrambled to replace Middle East supply disrupted by Strait of Hormuz constraints. Wood Mackenzie analysts said energy security concerns are accelerating coal use and delaying plant retirements across key markets. But Italy is proceeding with closures regardless.2
Removing 3.7 GW of dispatchable thermal capacity would leave gas as the primary flexible generation source in Italy's power mix. Gas generators in Italy have already faced significant fuel cost exposure. Arera's proposed compensation mechanism was designed to offset part of those costs, but it requires EC approval before it can operate, and the closure schedule appears to be running ahead of that process.1,6
Italy's government has secured separate political cover for energy affordability. Prime Minister Giorgia Meloni said late on Wednesday (2026-06-03) that the European Commission had approved Italy's EUR 14 billion, three-year plan to ease skyrocketing energy costs for households and businesses. Coal closures that push more generation load onto gas at current prices add fresh pressure to the affordability problem that plan was designed to contain.4
Meloni's longer-run answer to the supply problem involves nuclear power. Her government has pushed to overturn a decades-old nuclear ban, betting that energy security fears will overcome Italy's historically skeptical public. E&E News reported on May 21 (2026-05-21) that the legislative path faces substantial political obstacles. Any new nuclear capacity is well over a decade away, which keeps gas as the structural bridge regardless of how that debate resolves.3
Italy's power market structure is itself in mid-transition. Arera said on July 14 (2026-07-14) that Italy should adopt zonal electricity pricing by 2030, a reform already written into law. Zonal pricing would expose regional supply-demand imbalances to market clearing prices more directly. A 3.7 GW withdrawal of dispatchable thermal capacity could deepen those imbalances, particularly in regions that have relied on coal plants for local dispatchable output.5
The practical sequencing across these policy tracks is the immediate risk. Coal exits on an "imminent" timetable, the gas compensation mechanism is still in Brussels, and the zonal pricing reform is several years out. If closures proceed faster than the support structures meant to accompany them, the load falls directly onto gas generators and, through pass-through pricing, onto Italian consumers.6,1
Italy's winter 2026-27 heating season is the first real test. Gas must cover peak demand without the 3.7 GW of dispatchable coal now closing. The consumer cost of that shift lands on a system where the EUR 14 billion affordability package has three-year funding but the gas-generator relief scheme has yet to receive regulatory form.4,6