Energy Crisis in Italy: The End of a Model?

Italy is caught in a pincer attack. On the one hand, the green challenge forces a rapid and global energy substitution, while the Italian productive and social structure was based over decades on fossil fuels security. The rising geopolitical crisis, especially in Ukraine, on the other, enhances the prices of energy. The account[1] is salty: over 55 percent for electricity and over 41,8 percent for gas in just one year, pushing up charges to the consumer; an increase in the cost of bills of 500 euros more for families on average estimated Estra, the energy multiutility of central Italy. The first Italian category association, Confindustria, told the effect is “dramatic” for industries. The Copasir (Parliamentary Committee for Security) warned against “Italian vulnerability.” The government tried to limit the losses by allocating about 5 billion, but it seems like a short-lived palliative. 

Implementing the regulatory framework of the European Union, Italy has undertaken to reduce emissions globally by 2030. This goal includes interventions of various kinds, such as those for the modernization and efficiency of real estate assets: insulation, improvement of the thermal coat, replacement of old heating systems. These measures have given impetus to the construction sector, which has always been a driving force for the Italian economy. Furthermore, Italy has set the goal of abandoning coal from the energy mix for 2025. At the same time, a substantial acceleration on electric cars, electric mobility, and related structures is understood that the costs are very high and the yield very poor.  

The use of renewable energy sources in Italy has increased in recent years, but they cannot replace fossil fuels and are not adopted promptly. There is a severe lack of intermittence; they require long-term investments and rare-earth elements increasingly expensive and monopolized by China.Although it has been widely used, hydroelectricity is stuck at stake. Political vetoes and two popular referendums (1987 and 2011), which might be seen as a certification of popular sentiment and can invalidate a law but not technology, stopped nuclear power – even if there is a renewed focus. Procuring energy from the sea waves is still in the experimental stage. In sum, fossil continues to exist without having any stable alternatives.   

An Organic Crisis  

The Italian industrial system comprises small and medium companies, concentrated in specific production areas: eyewear in Belluno, milk sector in Parma, textile in Prato. Those industries or supplies inherit the local artisanal tradition, are interlinked and complementary, and are highly energy-consuming. This industrial proliferation derives from energy stability.  

The model of small and medium-sized enterprises has been in crisis for over a decade: the economic and financial crisis, the lockdown. According to an ISTAT (Italian Institute for Statistic) forecast for 2021, 45 percent of medium-sized companies aren’t prepared for a new “exogenous crisis.” The energy crisis can be a death blow.  

The energy bases[2] are democratic in the definition. Again, Italy was a clear example. Carbon and oil guaranteed not only a continuous flux of electricity, but they were also the propellant of a social stability model, where rights, well-being, and democracy were secured to a large part of the population. So, Italy is dealing with more than an energy crisis.  

Is Italian Gas a Solution?  

The sudden increase in prices, the absence of green alternatives in the short term, the block to nuclear power: Italy is stalled. Although, there is a unanimous agreement about a possible way out: use Italian gas reserves. Every year Italy consumes 70-75 billion cubic meters of gas. In nine months (January-September 2021), over 50 billion – growing in 2021 compared to 2020 – were imported while not even three million were extracted from the Po Valley and the Adriatic Sea deposits.   

Estimated reserves are about 90 billion cubic meters: extraction costs are 5 cents per cubic meter compared to 50-70 cents of the imported one. The 90 billion is just an estimate, the reserves can be much more substantial, but now there is no private investment due to the regulatory uncertainties. The publication of Pitesai[3], the gas regulatory plan that defines search and exploitation limits, can impulse new buys once operational. In any case, to enhance internal flows, there might be enough to modernize the active extraction installation or reactivate those that have been inactive for years.  

Meanwhile, Italy started exporting gas to other countries, especially Holland and France. The SNAM group has adapted the Italian gas system to allow the flow to inbound and in the opposite direction, towards abroad. One other reason is the entry into service of the Trans-Adriatic Pipeline that carries gas from Azerbaijan[4] through Turkey, Greek, and Albania, diversifying the sources of supply (the gas came from Algeria and Russia). The infrastructure is part of a significant European diversification strategy and emancipation from Russia.  

The European Union has understood the difficulties in the ecological transition, aggravated by the breakthrough tensions with Russia. So, it evaluates the inclusion in the European taxonomy, crucial for investments of gas and the divisive nuclear. Including natural gas in the list of green technologies could be an additional incentive for investment and research, and it is a guarantee of stable supplies.  

Conclusion  

Energy prices are more susceptible to fast and uncontrolled changes in a globalized world[5]. Hence, a strategy of flexibility and diversification is appropriate, and energy is an indispensable part of a comprehensive security approach. After the upward peaks, gas prices seem to normalize. However, there are many unknowns: tensions with Russia and, directly connected, the activation of Nord Stream on which yet another back and forth with Washington is taking place. In addition, Germany pursues the atavist Ostpolitik, which the US oversees.  

The recent and still unresolved crisis has taught Italy that it needs to change the long-established energy policy.Up to now, Italy has adopted an “energy monoculture” with an unconvinced diversification that has led renewables to growth, albeit supported by public finance. The massive funding for the green transition can give renewables a new impetus. While nuclear remains a hypothesis, Italian gas can be a ready-to-use resource. In any way, Italy must necessarily accelerate the process.