It is from the world of energy that, in a Europe in tension due to the Catalan secession and still in shock due to the outcome of the vote in Vienna, a barrier to populism and the disruptive pressures of the Brexit model could arrive. Or to put it in other words, it is precisely the energy sector that can be the driving force behind greater integration among the current 28 (including the United Kingdom for now), sometimes quarrelsome, member countries of the Union.
This was stated by Simone Mori, top manager of Enel as head of European affairs, and president of Elettricità Futura. And it is in this latter capacity that he answers questions from FIRST online. The association was born in 2016 from the union between the "thermoelectric" companies of Assoelettrica and the green producers of Assorinnovabili. A distinction that no longer makes sense since all electricity generation is now projected towards renewables and decarbonisation, an objective at the heart of the European targets for 2030: reduction of climate-changing gases by 40% compared to 1990; share of at least 27% of renewable energy consumption; at least 27% energy savings compared to the current policies scenario. But will these objectives hold up in a Europe that is losing support? How long will the transition towards what looks like an epochal revolution last? And what investment cycle is set in motion for Italian companies? Here are his answers.
Catalonia is quarreling with Spain, Austria swerves to the right and raises anti-immigration barriers, the United Kingdom will leave the club of 28: geopolitical tensions are increasing in Europe driven by the populist advance. Are you afraid of the impact of all this on the energy sector where the world is being planned for the next 40 years?
“I tend to be quite optimistic: by nature, but also for objective reasons. The EU is trying to use the tools it has to promote European integration in the energy field. There is certainly a delicate line where the policies that are decided in Brussels must be reconciled with the operational choices that remain available to the individual nations. This is the case of Italy with the National Energy Strategy (Sen) currently undergoing definitive approval by the government: it will be submitted to Brussels.
“You ask me what would happen if national policies undermined European objectives. I reply that this hypothesis does not seem to me to apply: none of the 28 EU members has so far questioned the objectives of energy integration, not even the most extremist, from Farage's UKIP to the right-wing of Eastern Europe. And I also observe a certain media clamor in proclaiming that Europe is in danger when Le Pen rises, then it is safe when Macron wins and falls again when Kurz conquers Austria. Let's keep our feet on the ground: that energy integration is a value for everyone is shared in Europe because an integrated Europe is safer, works better and solves supply problems with mutual aid. Furthermore, Europe has a leadership position on issues such as energy efficiency, smart grids, electric mobility and all of this counts. And it acts as a barrier against divisive forces. It is no coincidence that just a few weeks ago Brussels mobilized for the "Airbus of batteries" project. ”
What is it?
“The vice president of the Commission, Maros Sefcovic, has launched the proposal for an Airbus model consortium in the field of batteries for electric cars. The starting point is this: as Europeans we produce the best internal combustion engines in the world but we risk that, with electric mobility, American or Chinese batteries end up in the bonnets of our cars. For this Sefcovic gathered 14 European governments in Brussels, representatives of the automotive industry and otherwise. Unfortunately, Italy did not show up, while Poland sent two government representatives and it is said that it wants to apply to host the maxi-factory that would arise from the pan-European agreement. As he sees, even the countries that give the impression of wanting to resist, for example by defending coal, when they play their cards, they do so by betting on the future”.
Smart grids, digital meters, energy saving and above all advanced renewables and electric mobility: the world of energy is in full transition. How long will it take to complete the process? Contrasts are also played out on the times: FCA with Sergio Marchionne raises doubts about electric traction cars and speaks of a "double-edged sword".
“2030 is already tomorrow and we can imagine, for that date, the strengthening of some trends but no more. We place the most visible effects of this revolution in 2050. Then electricity generation will have practically zero emissions, i.e. entirely renewable, and this upstream benefit cannot fail to be transferred downstream. In 2050 electric mobility will have replaced that from fossil fuels in private transport even if heavy transport, sea and air will still retain space for hydrocarbons. In the next few years we expect very significant percentages of growth for the electric car on new sales, even if the replacement rate on cars in circulation will appreciate more in 2050. It is however very important to decide today the objectives for 2030 because they will determine investments and we will carry the effects with us to 2050 and beyond”.
What targets do you consider realistic for the Italian electricity industry by 2030?
“We forecast a reduction of climate-changing emissions of 48% over 2005; an increase in the penetration of the electric carrier from 21 to 25%. In other words, for every calorie consumed, one quarter will be electrical. Deloitte predicts 50% electrification by 2050. And a 25% reduction in energy intensity, ie the amount of energy needed to produce a unit of GDP. Finally, we project the share of renewables at 48-50%, slightly above the government's estimates with Sen. These objectives can be reached with a scenario of electricity consumption of 340 billion kilowatt hours per year, but they can accelerate if consumption rises also for effect of the policies that will be adopted”.
How many investments can this “revolution” set in motion?
“Deloitte estimates from 220 to 330 billion by 2050 for Italy alone. Basically 9 billion a year. These are realistic numbers, we don't consider them extraordinary. 25-30% will go to renewable plants, it is clear, not only to increase capacity but not to lose it with the progressive aging of the fleet. It will also be necessary to invest in residential buildings and services to promote energy efficiency. The rest will be directed towards digital distribution networks, accumulations and the promotion of the electric car”.
But are there the conditions to make such a significant mass of investments? And above all, what impact will it have on electricity bills? More than 50 billion have been invested in photovoltaics in five to six years and we are still paying 12,4 billion in bill incentives.
“The conditions for investing are there. Furthermore, the incentive load on bills has reached its peak and will decrease significantly. A wedge therefore opens up for available resources: a part will go to support Italian energy-intensive industries, but a part is likely to be allocated to new investments in renewable sources. We are talking about 200 million a year, according to Althesis estimates, a more than bearable level. The mechanism already exists and is that of the auctions tested for the largest plants. And this will solve the problem of incentives in relation to the cost that is passed on to the community. The question of how to compare the auction price with the market price remains open given that Europe has given itself a short-term horizon, there are no long-term contracts and volatility is high. The entry into force of the capacity market, which remunerates the plants available to cover demand when needed, should be close after years of endless debate. And this too will stabilize the market.”
But with the Italian elections now in the pipeline, isn't there the risk of having to start all over again?
"The political cycle is always to be taken into account, the Sen is an act of direction, I think there are conditions for optimism about the capacity market".
What do you ask of today's or tomorrow's government?
“Essentially we ask for clear objectives that allow companies to do planning; we ask to avoid leaps forward or backwards and to maintain a progressive approach. For example, we ask for a three-year plan for the auctions of renewable sources, as is done in France or Germany, rather than annual decrees that arrive in December when the auctions start in March. Finally, we ask for administrative simplification for the repowering of the plants and that a part of the auctions be reserved for the new parks to be built".
One last word on the full liberalization of the market which will take effect from 1 July 2019. It will affect 20 million families, more or less. Many fear it could lead to price increases. But above all, is there the necessary transparency on the market to guarantee clear and comparable offers and reliable operators? Energy is no joke. What can you do as an association?
“Electricity is an irreplaceable asset, both for families and for industries 4.0. It is essential that it is offered in the most competitive but also sophisticated and advanced way possible. How to ensure that the market does not go to the detriment of consumers who are unable or unwilling to make more sophisticated or innovative consumer choices? Everyone, let it be clear, must be guaranteed transparent offers and in line with their needs. It must be recognized that our market is quite advanced with a good exchange rate between managers and second generation digital meters already being installed when in France and Germany they are much further behind. However, there is room for improvement. The proliferation of the number of subjects on the market, over 500, is unique in Italy. And not all of them have the characteristics of stability and economic-financial requisites such as to guarantee the service. The list of suppliers expected by the end of the year, to which we are contributing as part of the consultation with the Energy Authority, should allow only healthy operators to be left on the market. Let's say that we need a system of rules that help the competition play but without plastering it. And the Authority was sometimes prompt, others ended up chasing the operators”.
