Arm yourself and let's not leave. The new brake on electricity liberalization, postponed for a year for the second time and postponed to mid-2019, freezes the expectations of businesses even if it gives Italian families more time to prepare for the news. But is it good or bad? And what results has the "half liberalization" adopted in Italy had so far on electricity bills? The decision to distance the goal of a totally liberalized energy market comes just as the G7 Energy, which takes place tomorrow, Sunday 9 April, and on Monday to talk about the climate and decarbonisation, will also serve to take stock of the National Energy Strategy (Sen) which the government will present to the Partners convened in Rome for the occasion.
In the meantime, the battle is raging – and the clash of interests – between those who would like to play all their cards on green energy and those who instead defend the role of gas, oil and coal in a country that produces two thirds of its electricity from fossil sources ( 90% imported) but which also achieved the European 2020 targets early by covering 17,6% of gross final energy consumption (electricity, heat and transport) with renewable sources. To have an order of values, it is useful to remember that there are 20 million "protected" customers who will have to switch to the free market and that this market is worth about 15 billion euros a year, corresponding to the sale of 70 billion kilowatt hours.
The energy skein is therefore rather tangled and we asked a Davide Tabarelli, president and founder of Nomisma Energia, to help us unravel it in this FIRSTonline interview. He is passing through Rome after presenting his study on the "Critical issues of the electricity market liberalization process in 2018".
“The knots of the energy policies implemented in the last fifty years are coming to a head – warns Tabarelli immediately – in a complex sector, in which realism, prudence and a careful evaluation of the costs and benefits are needed to avoid downloading higher charges on the bills and on consumers".
Instead?
"Instead I see a lot of confusion."
Do you think about the 5 Star Movement? No Tap, no oil, no gas, electrification of transport, no import of nuclear energy from abroad, domestic accumulation plants to be preferred to the larger ones serving the stability of the grid: these are the guidelines posted by Beppe Grillo and vote on the starred blog. Complete decarbonisation and 100% renewables by 2050: is it possible?
“It's a book of dreams, confused to the point of nightmare and completely removed from reality. Revolutions, and this one goes beyond the most radical environmentalisms, are beautiful and easy to announce but a little less to carry out. Instead, I think realism should be used to avoid higher costs to the community".
What do you suggest we do then?
“I suggest moving in the direction indicated by the European Union and pushing for energy efficiency. We call on the EU to urge China to make decarbonisation commitments. We are not throwing away our assets of gas-fired combined cycle plants and, to improve the diversification of supplies, we are building the Tap gas pipeline in Puglia by temporarily moving 200 olive trees which will then be replanted in the same place once the work is completed. The electrification of transport is expensive but let's do it in big cities. Yes to photovoltaic and wind power but without the excesses of the past and with the gradualness necessary to avoid instability on the grid linked to the fact that they cannot be programmed”.
The end of the enhanced protection mechanism for families and small businesses, which leaves the Energy Authority with the task of setting the prices of the electricity bill, is postponed by another year but sooner or later it will happen. It has been ten years since domestic customers were given the opportunity to switch to the free market. How has this partial liberalization worked so far?
“Since 2007 the rates have increased by 24%, for an extra cost of 90 euros per family. And this also partly explains why there are still 20 million domestic customers who have not switched to free access against 9 who have already done so. The price of energy accounts for about a third of the bill, while the remaining two thirds are affected by charges attributable to different policies, such as incentives for renewables, taxation and management charges. In this situation, the possibility of making significant discounts on the final price is very limited".
The price of megawatt hours on the electricity exchange has halved also due to the effect of renewables, but the fuel component on bills has not dropped. Who forfeited the difference?
“The price has dropped but in the meantime the dispatching services market has exploded: a phenomenon on which Confindustria raised the alarm a year ago and the Authority is investigating”.
We have entered technical terrain but it serves to make people understand the complexity of the electricity system. Does this also slow down free passes?
"There is no doubt. The complexity is in the numbers: we have calculated that it takes about 9 minutes to read an electricity bill and six hours to understand it (see the table below, ed) against 1 hour estimated for car insurance. Despite the high prices, however, the incidence of electricity is relatively low compared to the annual expenditure of a family, around 0,9%. It does not affect much and therefore attracts less attention than, for example, car insurance. In all European countries the link with the old supplier is strong, the majority of consumers are satisfied with it ".
According to your research, 85% of consumers in Italy have not switched suppliers. And Enel remains the dominant operator. In telecommunications, on the other hand, liberalization has worked.
“It's a comparison we can't make, first of all for historical reasons. Enel is objectively dominant on the protected market with an 85% share of the energy supplied but this is the legacy of the nationalization wanted in 1962 to bring electricity to everyone. One can work to change it but the process is not that simple nor can it be violent. The other aspect to consider is that in 2007, in opening the transition to the free market, we were the only country to allow free and protected markets to coexist. A bit like with the self-services in the fuel network: you are kept served and do it yourself. Now the knots are coming home to roost making the transition to full liberalization more difficult”.
So was postponing a wise choice? Minister Calenda explained that energy "is a huge liberalization that impacts on many families and in which there can be no risk of price increases".
“The difficulties that have emerged in recent years must not be a reason to interrupt the path towards greater freedom for end consumers. Liberalization remains one of the essential objectives of the evolution towards greater efficiency of the entire structure of the European electricity market of which Italy is also a part. No one has done like us in Europe: always the double track, in words competition, in reality administrative guarantees, more bureaucracy, more State which, then, shows all its difficulties. To say, as our minister did, that it is necessary to postpone the risk of increases, is an own goal, a contradiction in terms. The free market must work to bring benefits to consumers and if it doesn't work it means that our country doesn't work. And then, will 2019 be better? The problems come home to roost, we only had to leave the free market in 2007 and avoid the Greater Protection.”
What should be done to facilitate the start of the free market and break the current deadlock? Can auctions be used?
“To facilitate liberalization, nothing revolutionary needs to be done. The hypothesis of auctions to sell "packages" of protected customers to those offering more advantageous conditions is supported by Enel's competitors, such as Edison, Engie, Illumia and Sorgenia, but I consider it an extrema ratio which leads to the opposite result of what is wants to get because auctions limit the consumer's freedom and make him less aware. Instead, it is better to focus on tools that are already available such as similar protection, smart meters, the integrated information system. And then we need to multiply our efforts to further simplify bills, to inform customers by asking for better communication from the operators themselves".
