It is there for all to see: the Kremlin's threats to shut down gas supplies have not only caused the bills relating to this raw material, but they also made those of theelectricity. The Italians have already begun to feel the effects of the effects of expensive bills, which not only affects the monthly bills, but every aspect of life: for example, the prices at the bar have already increased, an immediate attempt by the merchants to go and recover a small margin on indispensable habits, such as a coffee at breakfast.
But why, if the price of gas increases, so does the price of electricity?
"The regulators have decided to link the trend in the price of electricity, including that produced from renewable sources, to that of gas - he explains Alexander Pallotta, partner Assium and expert consultant of the Utility Management market trends – This had the advantage of encouraging green plants, guaranteeing higher profit margins and offsetting initial investments
to build wind or solar ones”.
The system held up until the price of gas soared, and that of electricity was forced to adjust. “In Italy about half of the electricity is produced by gas-fired plants which guarantee that continuity that renewables do not currently have. L'discrepancy however it derives from the fact that if the price of gas soars, this increase also has repercussions on the price of electricity produced also from renewable sources, which should be cheaper par excellence”, continues Pallotta.
This is where the decoupling concept: Allow each supplier to set a price based on production costs. Until a few years ago, market dynamics and the price determined in the real exchange between supply and demand for commodities were the basis on which expectations were formed on derivative products (futures) which fuel speculative activity.
"Here, the opposite is happening today: it is the expectations on the future dynamics of prices represented by the value of futures on gas or other goods that determine the price of the market exchange".
This is the case in the main market for wholesale gas trading, denominated Title Transfer Facility (TTF). The logic is therefore purely speculative. The price that is determined is not influenced by the effective demand and supply of gas, but by future expectations. Unlike what happened with oil in 2008 – the alleged scarcity of which was triggered by the news that the Baku fields were about to run out – today the supposed shortage of gas is based on the strong international geopolitical instability and on the international tensions between the USA, China and Russia.
The Eni report "Natural Gas - Supply and Demand"
And to be honest, gas is by no means a scarce natural resource at the moment. According to Eni report "Natural Gas - Supply and Demand” according to the World Energy Review, published on July 26, 2022, current reserves are sufficient to cover the growing need for over 59 years. Why does speculation happen then? And who is it for? "L'speculative activity it suits many. Firstly, to the large hedge funds that by creating the bullish bubble can obtain high capital gains, to then withdraw at the right time, but it is especially convenient for the large energy companies. Anyone who can take advantage of standard long-term contracts with gas producers (such as Gazprom) enjoys extremely advantageous conditions with a price locked in much lower than the current sale price. Anyone who does not have this privilege can always buy gas on the American market at a decidedly cheaper price”.
It is not surprising that only in the first quarter of 2022, according to data from Arera (the Regulatory Authority for Energy, Networks and the Environment), the light bills have grown by +131% compared to the same period of 2021, +94% for gas. The extra profits forfeited by the energy companies thanks to the difference between production costs and the Pun (acronym for Single National Price, i.e. the wholesale reference price of electricity that is purchased on the Borsa Elettrica Italiana – IPEX – Italian Power Exchange market) are worth, according to Assoutenti estimates, the beauty of 27,9 billion euros in the first quarter of the 2022. The Ministry of Economy increases the figure to 40 billion. The gain is obvious.
Thinking of limiting speculative activity with a decree is not possible. But some interventions could be usefully introduced, such as the decoupling of the gas market from that of electricity and renewable sources. While waiting for the State to do something concrete to counter the crazy rise in bills, one thing we can do immediately to protect ourselves is to rely on a Certified Utility Manager according to UNI 11782 of 2020, guarantee of competence and preparation on these topics.
