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Italy between energy security and the green transition

  • Rome
  • 15 February 2023

        At one year from the start of the Ukraine war, which has upended an energy sector already struggling under the pressure of the post-Covid recovery, Europe finds itself faced with a “trilemma”: on the one hand an energy supply security issue neglected over recent years in favor of “green deal” projects; on the other, the need to set realistic, concrete objectives for completing a green transition that, from the EU’s standpoint is sure to be a major growth driver; finally, the not to be neglected problem of promoting the transition’s economic sustainability while ensuring competitiveness.

        Europe’s approach to these questions has changed considerably from the “Fit for 55” approach, whose push toward renewables seemed the only solution to both supply security and economic sustainability thanks to a significant reduction in the cost of green technologies. Without changing the overall paradigm of Europe’s efforts to achieve decarbonization, the more recent Repower EU responds to the shifting scenario by proposing a concrete, detailed policy consisting of three pillars: a strong emphasis on decarbonized energy that nevertheless includes a broader spectrum of technologies, starting with nuclear; a major push toward greater energy efficiency; and awareness of the importance of increased energy supply security. Yet, remaining problems are numerous. In terms of the technologies necessary for making the transition Europe has a competition problem with China, a global actor in this sector that could present a risk of dependency. Then there are the problems of competition from other economic zones such as the United States, which with its Inflation Reduction Act recently pumped 369 billion dollars into tax credits aimed at promoting the green transition. Europe’s response – limited for the moment to loosening restrictions on State Aid – is not enough, especially for those economies with a narrower margin for fiscal flexibility.  

        Italy’s ability to confront this scenario comes with both strong and weak points. Although authorization obstacles continue to delay the installation of renewables compared with other European markets, the country is making progress on supply diversification. The growing energy autonomy in this area, ensured not least by new liquid natural gas infrastructures, places Italy in a position to become a European hub. Moreover, the country is in the European forefront for implementation of a flexible electricity market which, given the persistent uncertainty of the general scenario, remains a prime source of leverage in piloting an orderly and efficient energy transition.