The Minister for Economic Development Carlo Calenda has announced his intention to update the SEN - National Energy Strategy (with a plan that we have provisionally called SEN 4.0) approximately 4 years after the approval of the last energy policy document. As a magazine "Utilities Management" we have been working on the topic for some months to give a contribution to the debate in various ways, especially within the context of the Observatory on Utilities (in partnership with Accenture).
We are interested in hosting qualified contributions in the magazine, to report the different points of view of the actors in the field and also the legitimate interests, which aim to condition the choices of the legislator and the regulator. Here we would like to introduce the debate by listing the issues that seem to us to be of the greatest importance. Obviously in extremely synthetic terms since each of the points touched could be exploded into hundreds of pages. We also believe that the SEN 4.0 must have somewhat different connotations from the (few) historical plans: no longer essentially the assumption of consumption growth and the related methods of satisfying them, but a more articulated vision with roots in the industrial question.
The complexity of SEN 4.0 lies in the transition phase that the sector is experiencing globally: it is clear where we come from and much less clear where we are going and where we want to go. There are various elements of this transition that are briefly recalled here:
1. Energy needs. In historically industrialized countries (certainly as in Europe) production capacity tends to be in excess and demand is stagnant (also due to energy efficiency). The situation is the opposite in several emerging countries where supply fails to follow the dynamics of demand. But remaining in Italy, there are many questions to be answered: what could be the effects of an economic recovery? Would the decoupling of growth from energy consumption be confirmed? What are the impacts of energy efficiency? And those of the electrification of the system?
2. Energy mix. The development of renewables, tumultuous and certainly not concluded at a global level, and the sharp drop in their cost have changed the terms of reference in many countries. The traditional systems based on fossils have been put into crisis and the costs of fuels (gas, coal and oil) have also collapsed, even if it is clear that fossil fuels will be fundamental in the next at least 20-30 years. Europe is pushing for the development of renewables, but what could be the ideal mix for Italy, taking into account the various issues such as cost, safety, independence and the environment?
3. Energy independence. In general, many nations aim at energy independence, aiming to exploit the resources available within the country (if there are any…). This logic is indeed guided by the United States which has long aimed at reducing imports of gas and oil; it is probable that this strategy will be confirmed by the new President Trump (perhaps with a mix less attentive to renewables). Italy has historically been very dependent on imports and this phenomenon has reduced somewhat with the development of renewables. Should we continue on this path? Until what point?
4. New models of Generation-Consumption. The development of these new models is made possible by the collapse in the costs of renewables, storage systems (particularly batteries, but not only) and the development of telecommunications. The figure of the prosumer is spreading as well as the articulated approaches of demand management are also increasingly important in determining the size and performance of electricity systems. Even the spread of electrical storage systems in the various parts of the system (in transport, distribution and even in individual homes) have significant potential. Developments on these points will greatly depend on regulatory choices which will have to optimize the overall impact on the system of any acceleration of new models.
5. Regulation and legislation. In this transitional phase, European and national standards, as well as the regulatory choices established by the authorities, are central in determining the development paths of the system. In many countries of the world the theme revolves around the management of the conflictual relationship between the old model and the new model. And even in Italy the conflict on the subject is often latent and unresolved.
6. Energy efficiency. By now everyone knows that energy efficiency is the most important "fuel" available today: it has relatively lower costs, it does not pollute, it avoids investments in new capacity. Sometimes the contradiction emerges between this fact and the real public policies to support investments in this area. Even Italy is not exempt from this syndrome, which must be overcome also taking into account that there is a world market for energy efficiency which can be highly receptive to valid solutions.
7. Energy networks. The role of the networks is strongly evolving both in adapting to the new methods (and quantities) of generation and consumption and in carrying out wider and more articulated functions. Think of ultra-broadband or the Internet of Things. Far from being finished, networks are having, and will have, a new youth based on greater flexibility and intelligence with impacts that may also be significant from an economic and social point of view. This will also depend on policies supporting modernisation. Still on the networks, one must ask whether and to what extent greater integration between TSOs and DSOs can bring benefits in the sense of greater coordination between them; international integration can also be relevant in this direction.
8. Market structure. It is evident that the current structure of the electricity market was designed on the basis of historical generation-consumption methods. And also the historic effort to mitigate the impacts of the liberalization process has led to situations such as the enhanced protection service or the (questionable) fees for interruptibility, which in fact have strongly distorted the market with respect to a vision of full and true liberalization . Then there is the whole issue of ancillary services or the remuneration of "capacity" which require careful reflection. More generally, the process of integrating renewables into the system must be determined with determination according to balanced methods, which also have as a reference the optimization of generation costs. This, without creating uneconomic situations which could also lead to structural imbalances in the system in the medium term.
9. Economy profiles. It is clearly a sensitive issue. It is clear that the cost of energy has a significant impact on the competitiveness of economies and social systems, but also on the economic balance of companies in the sector or even on their survival, as we have seen in recent years. One wonders how much the market structure, with all the historical and recent distortions, can really give significant price signals. Someone puts forward the idea of returning to prices substantially fixed exogenously on the basis of a series of policy assessments, including medium-long term ones. The risk of various pressures leading to a sharp rebound in costs is entirely possible and needs to be brought under control. In Germany, with the advent of the so-called Energy Wende, there has been a series of measures which, according to the operators, have greatly increased the cost of generating, transporting and distributing energy. This must be avoided, we believe. How to avoid, easy to say and difficult to implement, proposals for multi-billion dollar financing to manage the transition process.
10. Structure of the SEN 4.0. The topic is open. Is a detailed document preferable or a concise one that reports the key points, deferring the actual implementation to specific measures? It is probably appropriate to think of a concise document that explicitly sets out the objectives, constraints and basic strategies, also to leave the necessary flexibility to the individual measures which must adequately consider even the short-term dynamics.
