The seminar discussions got underway with the observation that international energy markets are the litmus test of a crisis whose outcomes are still uncertain. The dramatic slump in global demand has triggered a sharp fall in prices, but speculative interests and unfounded concerns that the peak oil point is approaching continue to artificially sustain share prices at levels that lack any sound market justification. While it is too early to predict the recovery trajectory with any certainty, it was noted that the possibilities include: a V-shaped recovery, as envisaged by those who see optimistic signs emerging, the much more worrying prospect of a double dip recession (the so-called W-shaped scenario), and the grim outlook of stagnation in the medium to long term (the so-called L-shaped scenario).
Without question, the health of the Italian energy sector raises serious concerns, having registered a fall in activity of about twice the national average. The participants highlighted that, in essence, the crisis has turned the clock back by a decade in terms of figures. Growth prospects have become more remote in the face of massive investment in infrastructure that will remain unused and whose cost will weigh heavily on consumers’ utility bills. Hence the need to come up with a “planning framework” that injects a dose of stability, entailing a move away from the logic underpinning the “national plan” which sees the achievement of set targets being linked to compliance with a series of obligations imposed by the state on market operators. For the future, it will be necessary to put in place a “national energy strategy”, developing new economic mechanisms that put operators in a position to achieve targets.
A further necessary step in the modernization of the “planning framework”, it was suggested, will be to steer the country towards more informed policy choices on energy-related matters. The main priorities include overhauling the regulatory framework dealing with permits, which is currently a source of confusion, fragmentation and delay in the development of Italy’s energy infrastructure. Marked regulatory differences between regions contribute to creating a cumbersome system, often exploited to engage in speculative dealings, and soon to be the subject of infringement proceedings for failure to satisfactorily comply with EU rules on environmental impact assessments. Measures need to be taken to ensure greater consistency between the procedural requirements of the various regions, providing a “fast track” for operators intending to develop infrastructure rather than resell permits, and introducing an assessment and incentive scheme which rewards best practices.
The crisis has also had a heavy impact on the eco-compatibility of the Italian energy market. In 2009, for instance, investments in clean energy have halved. There needs to be a comprehensive study conducted into the options open to government to support the development of renewable energy sources and the improvement of energy efficiency in light of the 20-20-20 targets set in the European “Climate Action and Renewable Energy Package”. It was noted that the Italian incentive scheme, aimed at supporting the development of renewable energy sources, is among the most generous but also the most inefficient in Europe. The distortions inherent in Italy’s regulatory hotchpotch in the area of the green economy deter even the country’s highest-potential businesses. Moreover, the weighting of incentives in favor of energy production from sources with insufficient output to meet demand (primarily wind and photovoltaic power) fails to take into account the huge potential of investment in research and innovation. It was observed that although in line with the European average, public investment in energy research in Italy is frequently channeled into the wrong areas. There is a need to pursue a wide range of technologies which, whilst still at an early stage of development, are already proving to have great potential, with micro-wind power, second-generation biomass technologies, geothermal energy, and waste-to-energy production using selected fuels being just some of the options available. It is also necessary to dispel the belief that “since there’s little wind in Italy, it’s not worth investing in wind power”. The participants underlined that incentives should primarily serve to support the development in Italy of a solid industrial base and know-how in the sector. Lastly, the financing of incentives – currently funded entirely through end-user charges on utility bills, thereby giving rise to significant inequities – needs to be re-examined. The sustainability of making these charges part of overall taxation, with a view to making their impact more progressive, should be evaluated.
Finally, in relation to the 20-20-20 targets, there is the question of the trade-off between development of renewable energy sources and efforts in the area of energy efficiency. The question arises as to what approach Italy should take in order to achieve the desired goal of meeting 17% of total energy demand through renewables. On the one hand, it is clear that a single unit of effort applied to the numerator (renewable sources) is equal to five units applied to the denominator (total consumption). On the other hand, end-use energy efficiency accounts for 36% of current CO2 emissions reduction potential. Indeed, it is no accident that out of 58 billion dollars of investment in the energy sector proposed in President Obama’s stimulus package, over 50% of funds have been allocated for this purpose. The participants concluded that Italy boasts specific expertise in this sector and needs to invest and build on experiences like that in Bolzano. This would provide a good foundation for a change in Italy’s approach – one which moves away from the reticence often exhibited on environmental issues in international forums.