01 Aug 2025 REPower EU and regional energy poverty. The case study of Italy and SMEs losing competitiveness even before Trump’s tariffs
REPowerEU is a Programme to protect Europe from energy scarcity in the absence of Russia as a reliable energy partner and ensure long-term cooperation for energy security (and green energy transition) in Europe.
It came to life in 2022 and its announcement on 8th March 2022 already had a positive impact on energy prices, as it can be seen in the two graphs below (Figure 1 and Figure 2).
Figure 1 – Germany Electricity Spot Prices (EUR/MWh). Source: https://tradingeconomics.com/germany/electricity-price
Figure 2 – Italy Electricity Spot Prices (EUR/MWh). https://tradingeconomics.com/italy/electricity-price
It is worth noting that the price curves follow a similar pattern since the establishment of REPowerEU in 2022, but on different price levels. This will be explained later.
REPowerEU main goals are:
- To safeguard consumers and businesses from energy shortages
- To support Ukraine by weakening Russia financially
Through the following key achievements in terms of energy imports from Russia:
- No more coal imports (from 50% in 2021 to 0% in 2025)
- Reduced gas imports (from 45% in 2021 to 19% in 2024, planned to stop in 2027)
- Reduced oil imports (from 27% in 2022 to 3% in 2025, planned to stop by 2027, but there is the uncovered issue of controlling ‘shadow fleet’, i.e. ships employed by Russia to evade sanctions)
- no milestones for nuclear, only general goal to “restrict import”’
Figure 3: Reduced EU energy imports from Russia – Source: European Commission (2022)
REPowerEU strategy
REPowerEU has been launched within the track of the EU Green Deal and the accelerated transition to green energy and return to stable prices. The question is, how to get there in the new geopolitical context?
The gap in energy budget created by the absence of Russian gas can be filled through increasing renewable energy sources (mainly hydrogen, as it can be used in hard-to-abate sectors and is a dispatchable power source that can be transported and therefore imported) and energy savings motivated by higher prices for gas. So achieving the objectives of REPowerEU relies notably on scaling up renewable hydrogen and bio-methane (See: European Union, 2022).
However, while the REPowerEU framework sets ambitious goals, its success depends heavily on how effectively national governments implement their National Recovery and Resilience Plans (NRRPs). According to the European Court of Auditors (2022) , several REPowerEU-funded projects risk delays or budgetary shortfalls due to fragmented governance and insufficient monitoring across Member States. As the Court explains, “the total amount of funding actually available may not be sufficient to cover the estimated investment needs” and reliance on individual Member State discretion poses strategic risks. Strengthening coordination between EU institutions and national authorities is crucial to ensure uniform progress toward the plan’s targets (European Court of Auditors, 2022), (SEN Editor, 2022)
This goal would be achieved through short-term, medium-term and long-term policies (European Union, 2022)
- Short term policies:
- Diversification of imports (LNG and pipelines) using existing infrastructure
- Delayed phase-out of coal
- No phase out of nuclear (in Belgium and France)
- EU save: behavioural measures to reduce demand
- Medium term policies (until 2027):
- New investments in LNG infrastructure
- Investment in grid and storage
- Expand biomass in power generation
- Improve energy efficiency (mainly installing heat pumps)
- Invest in PV and wind
- Improve energy efficiency/ reduce use in industry
- Long term policies (beyond 2027)
- Invest in renewable hydrogen production in EU
The following graph shows the overall energy mix in the EU following REPowerEU, compared to the previous scenario under FitFor55. As you can see, REPowerEU plans for a greater reduction in energy use, as well as reducing the weight of natural gas in the energy balance and increasing the weight of renewables (including biogas), as well as slightly increasing the projected share of oil.
Figure 4 – Gross inland consumption by fuel in 2019 and in 2030 in the Fit-for-55 and REPowerEU scenarios (Mtoe) – Source: Eurostat (2019) and Primes (2030)
Some experts have voiced concern that REPowerEU’s emphasis on rapidly diversifying fossil fuel imports, such as LNG infrastructure and delayed coal phase-outs, may conflict with the Union’s long-term climate objectives. The Finnish Institute of International Affairs (Siddi, 2022) argues that without explicit phase-out pathways, such short-term investments risk perpetuating carbon lock-in and detracting from the transition to renewables. The FIIA analysis urges clear alignment of fossil fuel diversification with long-term decarbonisation goals (Siddi, 2022).
REPowerEU and energy prices
As a result of the energy market disruption caused by Russia’s invasion of Ukraine, gas prices in the EU increased consistently in 2022 and H2 2024
Under REPowerEU, the projected trajectories of energy prices in the EU are slightly different than under the previous plan, Fitfor55, as can be seen in the graphs below.
Figure 5 – Gas, Oil and Coal Prices. Source: European Union (2022)
As visible in the trajectories in the graphs above, the price of gas is projected to stabilise, albeit on a higher level than before the crisis. And we know that higher gas prices lead to higher electricity prices overall for consumers, as it is stated by the EU itself, “High gas prices have a significant influence on the price of electricity as gas-fired power plants are often needed to satisfy electricity demand” (European Union, 2023).
Furthermore, higher energy cost overall, driven by higher gas prices, and the possible switch to cheaper, less efficient energy carriers in the transition period, as well as building capacity for green hydrogen grid and storage, lead to higher overall system costs in the energy system in the EU (even excluding the cost of Carbon emissions). This is an increase of almost 10%, to about €1,900 billion per year. As estimated by the EU, “as a share of GDP, system costs increase from 11.3% of GDP to 13.4%.” (European Union, 2022, p.15, p.24).
Reduced gas consumption
The higher gas price will, so the projection, lead to lower gas consumption and replacement of natural gas with biofuels, reaching the projected reduced fraction of gas in the energy budget 2030, increased energy savings, and an increased fraction of renewables (including biofuels) as seen in Figure 4. The “Final energy consumption in the EU in 2030 is 768 Mtoe, or 4.6% lower than in the Fit-for-55 proposal. “ (European Union, 2022, p.13).
The effect of avoided consumption on industry due to high prices is projected at 1 Megaton of oil equivalent (Mtoe) across the EU.
Figure 6: Energy consumption in final demand sectors (Mtoe) – Source: Modelling using PRIMES, as seen in European Union (2022)
Reduced energy use in industry has effects on productivity and profitability of companies. The study (Figure 7) projected the effects of avoided gas consumption for industry in the EU by sector. The energy intensive sectors are the ones most affected and the graph gives an idea of the effect this avoided consumption has on companies.
Figure 7 – Source: Iscaro et al. (2022)
Beyond system-level impacts, the burden of higher energy prices disproportionately affects low-income households and SMEs, especially in countries with high gas dependency. While REPowerEU outlines system-wide cost projections, distributional impacts remain uneven and under-addressed. Policy experts have called for targeted compensation mechanisms, such as progressive electricity tariffs or direct subsidies. The EU-funded POWERPOOR project 2023 (Hinsch, Jäger and Sahin, 2023) highlights the importance of targeted local interventions, such as progressive electricity tariffs, energy cooperatives, and trained Energy Mentors, to mitigate rising energy poverty across diverse regional contexts. Embedding such tools into REPowerEU planning could ensure the transition leaves no vulnerable households behind (Hinsch, Jäger and Sahin, 2023), (European Commission, 2024) .
National energy mix effects of REPowerEU: the Case of Italy
The effect of higher stabilised gas prices compared to the pre-crisis price level (before 2022) and compared to the Fit-for-55 projections depends on the relevance of gas in the national energy mix. The price curves for Germany and Italy show a similar trajectory following the announcement of REPowerEU in spring 2022, but show a difference in current spot prices of 33 euro in 2025, despite a return to stable prices.
A look at the national energy budget in Italy helps to explain this difference. Italy has the highest share of natural gas (in red, 34,8%) in energy available by fuels in all of Europe in 2023. That explains why the price of energy in Italy is consistently above the EU average, as the EU REPower plan expects, and accepts, that the price of natural gas will remain above pre-crisis levels, even if stabilised, to facilitate the transition of the energy grid to green hydrogen and sufficient energy savings to achieve the REPowerEU energy budget projections (Iscaro et al., 2022, p.94).
Figure 8: 2023 Gross available energy by fuel (%). Source: Eurostat (2025)
Figure 9 shows that the Consumer Price Index (HICP) for Italy including energy, food and alcohol is much higher than the EU average, while the same index excluding energy, food, alcohol and tobacco is very next to the EU average in 2023. The reason for this can be found in the divergence of Italian energy sources for electricity generation to the European average. This allows for the inflationary energy prices influencing the prices of other goods in the economy, impacting the price of electricity and other goods for households and businesses, putting a strain on SMEs (Iscaro et al., 2022, p.97).
Figure 9- Source: Iscaro et al. (2022)
Figure 10 shows the correlation between gas prices and electricity prices, highlighting the stronger effect of this correlation in Italy compared to the EU average.
Figure 10- Source: Iscaro et al. (2022)