What should be making headlines in Italy

Italy is consumed with World Cup fever at present. But there are far more pressing issues at hand, specifically its energy needs, and "Europe's" historic blunder

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Forget the football: worry about energy
Timwork
Tim Hedges
On 19 June 2014 08:26

I remember an Italian girl asking me about sport in Britain and when I said we had football, cricket, and rugby, as well as one good tennis player, she was jealous.

Some Italians like cycling, but really, she said ‘there is only one sport’. She was fond of her boyfriend but he spent one night a week watching football with his male friends, one night playing it locally and one night talking about it.

At this time every four years, communication between the sexes is at its lowest, and the birth rate was already plummeting.

I have spent much of the past week having medical checks and each doctor or trainee has kindly reminded me that Italy have beaten England 2-1. I thanked them all for bringing the matter to my attention. Actually I was glad Italy won: it’s more important here, whereas Britain’s real favourite sport is criticising the national team.

But there was a riposte I could have made, had I been less polite. The match took place at around 1am local time, and Italy used one gigawatt (GW) of extra power. One GW is roughly equivalent to three power stations. The Energy Ministry will be quietly hoping they don’t make it much further in the competition.

Italy has struggled over the years with energy planning. I remember a decade ago a senior figure saying they didn’t like nuclear, didn’t want coal for environmental reasons, so were minded to go for electric power stations (think about that for a second).

The existing plan is for the base load – what would have been used if Italians had gone to bed early on the night of the big match – to be imported in the form of electricity from France and Switzerland, whilst the extra is made up by coal, and gas imported principally from Russia, in a pipeline running through Ukraine, and from Algeria, in a pipe running under the Mediterranean into Sicily. The Russian element was to amount to 30 percent of the total.

Italy has three gas import terminals, which allow gas to be brought in by boat, but they are hardly used, being undercut by the pipelines, particularly the Russian one. Three more approvals have not been taken up because of the low demand.

There could have been more but they were continually opposed by ENI, the former near-monopoly, which fought them by fair means or foul. And these terminals would have to be maintained whether used or not: energy security costs money.

There was a plan, devised by former Prime Minister Mario Monti, for new entrants into the market and fierce competition but that has withered, in part because they could never agree on the level of subsidies, which are highly generous to solar and wind power, which don’t count for the base load because they don’t work all the time.

Also, it must be said, the Italian economy has not grown since it joined the euro, so power usage is low and energy, particularly gas, is cheap (though not to consumers, who would have benefitted from the Monti Plan’s competition provisions).

Now, however, things have changed. The Algerians for the last year have failed to meet their supply targets so usage of Russian gas has crept up from 30 percent to 50 percent. Putin doesn’t mind at all.

And now Putin is turning off the gas to Ukraine. The last time he did this, the Ukrainians stole some of the throughput gas intended for Romania, Hungary, Slovenia, Austria and from a southward branch, Italy. Now Putin says he won’t tolerate that so might turn off the whole pipe: half of Italy’s needs. The pipe, by the way, is known as the Brotherhood Line.

If there is one thing that will make the Italians yearn for Berlusconi it is this: he is best mates with Putin and might have sorted it.

The north of Europe will be all right, having the enormous North Stream Pipeline supplying them (particularly Germany). But North Stream, which comes in from the Baltic Sea, has no southerly branch to Italy.

Unfortunately in a fit of market-driven economics last year, Italy put out gas storage, in the old, depleted ENI fields, to tender. There was hardly any take up of the offer from industry and power generators, due to market conditions, so there are worries the reserve is insufficient. As I say, energy security costs money.

One can’t help feeling ‘Europe’ might have thought of all this before offering Ukraine a trade deal. It might just rank as one of the great foreign policy blunders of all time. As I write there is news that a pipeline running parallel to Brotherhood has been blown up.

But this is not popular knowledge and the Italians still have the football to look forward to. Forza!

Tim Hedges, The Commentator's Italy Correspondent,  had a career in corporate finance before moving to Rome where he works as a freelance writer, novelist, and farmer

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