Page 5 - EurOil Week 35 2021

EurOil COMMENTARY EurOil

system. Some 5.4 bcm also came from Norway 26 TWh from solar, 25.7 TWh from geothermal
and 1.6 bcm from the Netherlands, while 8.4 sources, 18.7 TWh from wind, 16.7 TWh from
bcm was obtained from other producers. coal and 9.7 TWh from oil.
Italy also began receiving supplies from Italy views the phase-out of coal and oil as a
Azerbaijan at the start of this year following the priority, by no later than 2025, and it has largely
completion of the Southern Gas Corridor (SGC) sought to do so by expanding renewable power.
system. But results so far have been relatively lacklustre.
Despite this diversification, however, Italian Despite an early boom in wind and solar deploy-
gas prices are relatively high for Europe, indi- ment, Italy has added limited extra capacity since
cating a lack of competition. Gas from the TGP 2013, falling behind other developed European
is typically priced at a premium to rates at the economies in terms of progress. Italy increased
Dutch TTF hub, because of how limited supplies its renewable energy capacity by only 7.2%
are. And other pipelines must be used at high between 2016 and 2020, while France expanded
utilisation rates to ensure that prices are not too its by 64.3%, the UK by 64.6% and Germany by
high. 37.4%.
What is more, a handful of big players control Excessive bureaucracy and localised deci-
the bulk of Italy’s imports, of which the largest sion-making have been blamed for stifling devel-
is Eni. Hindering competition further, the TGP opment, as they have been for slowing the pace
pipeline is not governed by EU antitrust rules, as of new oil and gas projects in Italy. In particular,
it runs through Switzerland, and deliveries from these factors have held up offshore wind projects.
Gazprom are made under a long-term contract While many coastal nations in Europe have rap-
that does not expire until 2023. idly expanded their offshore wind generation in
If Italy needs more gas to improve com- recent years, Italy still has only one 30-MW pro-
petition, the answer does not lie in increased ject in operation.
pipeline imports. Neither Algeria nor Libya The solution could therefore be more LNG
can offer additional volumes, and given that to cover rising energy demand, increase com-
Russia is already the top supplier, taking petition and ensure that the phase-out of coal
more volumes from Gazprom does not seem and oil-fired capacity is completed on schedule.
sensible. Supplies from Azerbaijan are antic- And this seems to be the Italian government’s
ipated to rise to as much as 8 bcm per year thinking.
once the Trans-Adriatic Pipeline is working Three projects with a combined capacity of 24
at full capacity, and this should help bring bcm per year have been authorised by Italy’s eco-
down prices. But Italy will need to look at fur- nomic development ministry. But so far no final
ther expansions in capacity to meet growing investment decisions (FID) have been reached.
demand, especially if it is serious about phas- This schedule could be overly ambitious,
ing out its remaining coal capacity. but if Italy can bring on stream some of this
extra capacity in 2023-2024, to coincide with
Renewables fall short the expiry of Gazprom’s contract and potential
Italy generated some 136.2 TWh of electricity improvements in Swiss law governing the TGP
from burning natural gas in 2020, equivalent to pipeline, Italy could maximise its gains in terms
just under half of total power production. A fur- of making its energy cheaper and cleaner for
ther 46.7 TWh was generated using hydropower, consumers.™

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