Cof course, there is the return of Donald Trump with his tariffs. There is increasingly aggressive Chinese competition. There is the problem of immigration. So many emergencies. But Italy and Europe have one that is more important than all and which is eroding the foundations on which our economies rest: it is the cost of energy. It is because of him, and not just China, that the German locomotive got stuck. It is also because of him that for 20 consecutive months Italian industrial production has seen one drop after another. And it is also because of him if foreign producers do not invest in us, as happened to the Chinese car manufacturer Chery which rejected the requests with a polite “no thanks”. advances of our government.
THEn Italy electricity costs too much. Steel factories like the Arvedi one in Terni are turning off their furnaces. We import cement or wood panels from abroad because it is cheaper than producing them ourselves. Stellantis also justifies the decline in car production with energy prices, which weigh 12 percent on car assemblers. Even those who manage ski lifts are suffering and fear seeing customers flee to some foreign resort. Overpriced energy slows down industry and consequently GDP, forcing governments to increase taxes or cut spending to reduce the debt ratio, whereas if the domestic product rose more rapidly those maneuvers would not be necessary.
«If we continue like this in ten years our industry will be dead» warns Aurelio Regina, delegate for the energy transition and president of the technical energy group of Confindustria. «The situation is very serious: since 2009, more than 117 thousand companies have disappeared, 25 percent of Italian manufacturing capacity. Today there are dozens of categories that are thinking of no longer investing in Italy and of relocating investments where the price of energy is more competitive or there are fewer constraints on greenhouse gas emissions. Why should a ceramic manufacturer come to produce in Italy when it can go to Spain where energy costs much less or to Turkey where it is not subject to the European CO² emissions market? Two striking examples: aluminum in Italy is almost disappearing. And today importing bags of cement costs less than producing them in our country, and we are talking about a material for which the cost of transport has a significant impact: yet imports are increasing drastically”. The data speaks clearly, Regina explains in this interview. «Meanwhile there is a European problem: the price of gas recorded on European markets is close to 40 euros per megawatt hour compared to four to eight dollars in the United States, thanks to its position as the world’s largest producer. This differential, which exploded after Covid and the war in Ukraine, is due not only to the need to import the raw gas material but also to the fact of having to secure supplies to avoid interruptions in supplies. Then, within Europe, the price of gas in Italy is structurally higher than in the Union’s partners, with differentials historically in the order of two-three euros per megawatt hour, a gap which over the years we have tried to mitigate with a series of mechanisms to limit their impact. This difference is due to the transport costs between EU countries, the current regulatory structure and the authorization processes that characterize our country: think, for example, of all the compensations imposed at a local level to make regasifiers accept. These are costs that then affect the bill. Unfortunately, in the energy field everything represented by incentives and benefits in Italy is passed on to consumers and not to general taxation”.
After the crisis caused by the pandemic and then by the Ukrainian conflict, not only have gas prices increased in Europe, but within the continent large differentials have opened up between the various countries, having each modified their energy mixes. «The upheavals in the price of gas have been reflected in that of electricity, penalizing the energy mixes most exposed to that raw material. Germany, a major exporter of goods, hit by the loss of very cheap Russian gas, has pushed for renewables and continues to use coal and lignite plants. Spain has also focused on large renewable energy plants and still has a fleet of nuclear power plants. France has the advantage of atomic plants. While we produce electricity using a lot of gas, which determines the price on the market for more or less 60 percent of the hours of the year. Result: in October the price of wholesale electricity in Germany was 86 euros per megawatt hour compared to 117 euros in Italy, i.e. we pay 35 percent more. In Spain it was 72 euros per megawatt hour, in France 63 euros.”
Huge differences. «Those from outside the continent who want to come and invest in us will look to Spain where at certain hours of the day the price of electricity drops to zero. In Italy, although investments in renewables have been supported by incentives from 2008 onwards, thermoelectric production remains fundamental for the stability of the grid and let’s not forget that the cost of CO² weighs heavily on the production of electricity from fossil fuels, which in the rest of the world is not applied or is calculated less onerously. Not only that: in Italy the cost of energy produced from renewables is higher than in other countries due to authorization costs, compensations or the price of land.”
What interventions do industrialists propose? «Confindustria has presented to the European Commission and Parliament a revision proposal to “decouple” the electricity market: in practice two parallel markets should be created, one with electricity produced from sources characterized by high investment costs and low operating costs, such as renewables, and the other with that produced by plants that have cost structures more linked to variable charges, as in the case of gas thermoelectric power, so as to determine prices more consistent with the real generation costs of the different technologies. The more renewables increase, the lower the market prices. Following this proposal, a European Regulation and a Directive were developed which have not yet entered into force. However, in the meantime in Italy the Energy Release will take effect on January 1st, a measure promoted by Confindustria which will allow industrial companies with high energy consumption to procure renewable electricity for three years at a competitive price for a third of their consumption. In exchange, companies must commit to repaying what was advanced to them in 20 years and invest in the self-production of renewable energy, creating a virtuous circle. It is a first example of what the electricity market of the future should be like, with the decoupling of renewable energy prices from gas prices.”
Confindustria asks the government to make a choice for the future: «Push the renewables sector, not only solar and wind but also biomethane and hydroelectric, whose production capacity can still increase; develop research on small nuclear reactors; and then continue to envisage other complementary solutions such as biofuels or hydrogen, useful not only for the manufacturing sector but also for transport, alongside electrification and consumption efficiency. The problem is that today in Italy building renewable energy plants is very complex: provisions such as those on agriculture or on suitable areas create obstacles to large photovoltaic fields. We need to change pace, simplify, otherwise we will never achieve the objectives we have set ourselves for the production of green energy.”
But in addition to the issue of price, two other fundamental factors must be considered: energy security, which emerged in its urgency with the wars in Ukraine and the Middle East. «All issues are connected to each other: if, for example, we want more safety we have to buy methane from different suppliers, but this has an impact on prices because LNG has higher costs given that it must be liquefied, transported by ship and then regasified. We have to deal with important economies such as the Chinese and American ones which are pushing the accelerator on industrial production with gigantic decarbonisation plans: 500 billion dollars in China, 380 billion in the USA against the tens of billions allocated in Europe. Instead of being more united, the European market risks being split precisely because of energy price differentials. We must find a balance in Europe between decarbonisation processes, which have their time, and the protection of industrial heritage. And the solutions must be sustainable, based on what I call ideological neutrality.”
Will we ever have a single European energy market? «In theory it would be right, it would allow the EU industry to compete compactly with American and Asian competitors without making war on each other. It would be nice, but it is difficult to imagine that those who today enjoy lower prices thanks to choices made would give up this competitive advantage. Much will depend on the development of interconnection infrastructures that can enable energy transfer and limit differentials on the markets.” Instead of uniting us, energy is fueling a further crisis in Europe. And it risks causing it to collapse.
