Italy's gas dependence to rise after nuclear vote
Trade the News
Wednesday June 15, 2011 11:40:16 PM GMT
* Nuclear shortfall in energy mix to be met mainly by gas
* Italy already heavily dependent on energy imports
* More disruption after Libya could threaten system-Eni CEO
By Stephen Jewkes
MILAN, June 15 (Reuters) - Italy is set to depend even more on gas imports after its citizens this week overwhelmingly rejected a restart of nuclear power generation.
Italy, already heavily dependent on imports for its energy needs, uses gas to generate more than half its electricity. In 2010 it imported around 75 billion cubic metres (bcm).
The centre-right coalition government of Prime Minister Silvio Berlusconi had proposed to reintroduce nuclear power and make it 25 percent of Italy's energy mix, alongside 25 percent from renewables, with a view to improving security of supply.
Italians voted overwhelmingly on Monday to ban nuclear energy, however, following Germany's decision last month to close all nuclear plants by 2022. Italian voters also rejected nuclear energy in a 1987 referendum.
"The anti-nuclear vote means there will be more gas, though we knew that already," said Davide Tabarelli, head of energy think tank Nomisma Energia.
"Even without the vote, it was always going to be extremely difficult to build nuclear plants in Italy. And, yes, there could be supply security problems."
Italy's loss of 13 percent of its natural gas supply, because of turmoil in Libya, caused few problems. However, the cut hinted at the dangers of interruptions from bigger suppliers such as Algeria and Russia.
The Libyan gas disruption is far less serious than the Russian-Ukraine gas crisis in the winter of 2006, which forced Italy to tap strategic reserves.
ENERGY THREATS
Paolo Scaroni, the chief executive of Italian oil and gas group Eni, said on Wednesday the blockage of other suppliers besides Libya would threaten Italy's energy sector.
Eni, Europe's biggest gas player by market share, has vital long-term gas contracts with Russia's Gazprom and Algeria's Sonatrach.
"Renewable energy sources will get a boost from the nuclear vote, but they are intermittent and that means gas is indispensable -- especially since clean coal technology has not taken off yet," said Paolo Ghislandi, secretary general of AIGET, Italy's association of energy traders and suppliers.
Red tape and grassroots opposition has slowed some major energy infrastructure projects in Italy, including utility Enel's plans to convert a power plant in the north to clean coal.
"Gas is stockable and Italy is building more storage capacity to help mitigate potential disruptions," Ghislandi said. Italy has around 14 bcm of storage capacity, most of it owned by gas transmitter Snam Rete Gas.
Snam, the biggest regulated gas business in continental Europe, has said Italy's strong pipeline links to North Africa and Russia as well as ample storage capacity make it a good candidate for becoming a Mediterranean gas hub for Europe.
PRO GAS
"Italy, and Europe, will go pro-gas to try and reduce the cost of power prices and help reduce inflation since renewables are still too expensive," UniCredit analyst Javier Suarez said.
Suarez said a condition for developing more gas was to develop much more reliable European infrastructure by tying together various gas grid operators.
Some analysts say that with Germany's exit from nuclear production and France's nuclear industry hit by a heat wave that has cut water supplies to plants, Italy could begin exporting power.
"With the drought conditions, France's nuclear production is in danger of closing, and that means there could be opportunities for Italy to export," an energy trader said.
In 2010 Italy imported 3.6 percent of its 326 terrawatt hours of power production from France, most of it nuclear.
Italy has an overcapacity of gas-fired power plants, which work at a fraction of their 8,000 hours per year capacity. That gives considerable flexibility for the system to ramp up production if needed.
(Editing by Jane Baird)
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