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Making the most of Italy’s energy resources

Rome, 16/11/2017, National Interest

Proceedings at this National Interest roundtable got underway with the observation that the energy profile of the planet is set to change over the next few decades, with rising population and improving standard of living trends leading to an increase in energy demand. Humanity will not only be faced with greater demand for energy, but will also have to solve the problem of securing access to energy sources, an indispensable prerequisite for facilitating the development of the world’s most deprived regions, while at the same time limiting greenhouse gas emissions into the atmosphere.

The participants noted that, in environmental terms, there are already positive upshots associated with a gradual decoupling of economic growth from CO2 emissions, the rate of increase of which is slower than in the past. The rise in energy demand will be centered on Asia, driven by India and China. Within China, awareness of the side effects of growth is spreading, with the environment becoming an ever-more debated topic. Renewables will come to represent a greater share of sources, while natural gas will play a foremost role in the world's energy mix.

It was suggested that international markets (for instance, Africa) are where it will be possible to seize enormous opportunities for the Italian economy. Accordingly, one way of maximizing Italy’s energy resources (understood as comprising know-how and expertise) would be to support Italian firms in competing within these markets.

The transition phase could – it was felt – be viewed as an information resource to be drawn on in steering change, by studying the evolutions of the energy system, its cost structures, and the new production methods cropping up in the market thanks to the decentralization of production, taking into account that this could lead to increased costs and that, therefore, the two systems (centralized and decentralized) are destined to coexist. It was submitted that the transition should be guided by principles that go beyond mere economic quantification, and instead weigh up a complete analysis of costs and benefits, including related externalities. The undertaking essentially entails moving from high-energy intensity to lower-energy intensity sources, which was held up as explaining the time needed to complete the transition. Naturally, an effective strategy that facilitates the transition would also need to be predicated on putting an accurate price-tag on CO2 emissions. The participants stressed that Italian action on this front at the EU level would be desirable.

As highlighted in the study entitled "Maximizing Italy’s energy potential in the transition scenario" presented at the roundtable, placing Italy’s situation within the international energy context necessarily requires analysis of energy consumption, emissions, and GDP trends. While Italy was characterized as being in line with European energy consumption and emissions trends, it was observed that the country exhibits a worrying lag in terms of GDP performance. This gave rise to questions of how the energy sector might contribute, with the answer seen as probably lying in the maximization of Italian energy production, both traditional and alternative, with a view to supporting investment, stimulating employment, and reducing energy dependence and hence energy imports. It was emphasized, in this regard, that energy is crucial to the development of the country, with its cost thus constituting a key factor.

With respect to electricity, the world’s power generation mix was acknowledged as still too coal-based, despite the fact that the share of renewables is expected to rise sharply. As regards Italy, the generation mix was considered rather virtuous in terms of CO2 unit emissions, indeed better than many other major European countries, thanks to the predominant role of natural gas and renewables. However, it was pointed out that renewables production has remained unchanged in recent years, and that in order for the targets set out in the National Energy Strategy to be met, it is necessary to create suitable conditions.

Nevertheless, it was felt that a reality check is necessary: today, the dream of having all energy sourced from renewables and the global fleet of cars powered electrically has run foul of unresolved hurdles primarily of a technological nature. Furthermore, the participants stressed the importance of not repeating the mistake of paying out incentives that are too high, and, above all, paid over too concentrated a period of time, without these going hand-in-hand with the advancement of technology. The risk of duplication of costs – which, aside from anything, are borne by businesses and households – was considered real, and while conceding that it is right and proper to look to the future, it was deemed equally essential to tackle the challenges of today. It was thus concluded that facilitating the transition, maximizing resources, promoting the switch from coal to gas, and increasing production from renewable sources would seem to be the keys to building a sustainable energy future – not just with a view to protecting the environment, but also to underpinning Italian growth.