Monday, March 27, 2023

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Gas measures: a lot of “Gold to the Fatherland”, little or nothing in practice

The interim government has decided on measures to try to solve the problems related to the shortage of gas in Italy, following the almost total cut of supplies from Russia.

First of all, I would like to stress, for the umpteenth time, that the ceiling on the price of Russian gas, which is also mentioned in the Commission, is useless. Moscow has already minimized supplies, shutting down Nord Stream 2 and reducing shipments via Ukraine to the west to a minimum. The cap is useless because, by now, it applies to a minimal proportion of purchases.

Secondly, very strong market distortions will be created in the EU: Hungary has signed a useful contract with Gazprom for the supply, at fixed price, of 5.8 million d i m3 of gas per day compared to the previous agreement already agreed. with Moscow. To this we add Portugal and Spain which have much lower voltages because they are not interconnected and equipped with LNG terminals. Add Norway, not part of the EU but a low-priced supplier of Sweden, and we have that the internal market is no longer uniform, indeed very strongly distorted, to the point of making European policies utopian.

But let's come to Italy: the government's measures had to deal with supply and demand. They were concerned only with the question, and with a very partial question. Virtually only the private sector has been affected by measures to contain gas consumption, with a drop of one degree in the temperature in homes and one hour of heating. Beyond the issues of control, these are minimal interventions. The gas

Domestic and condominium consumption was 24% of the total in 2020. Adding up part of the commercial areas, the urban ones, we do not arrive at 30%. You understand that the drop of one degree is a measure of social mobilization, but, from a practical point of view, of little use. The golden faith for the homeland is asked, but the real supply problems are not solved.

The biggest obstacle is the electricity generation which accounts for 30% of gas consumption in Italy.

Instead of asking for gold, or iron, for the country it would have been better to quickly organize the reopening of the still existing coal plants. In Italy there are seven coal plants, one of which is decommissioned, but it would be necessary to supply them with coal with adequate contracts (remember that the EU wants a ban on Russian coal from 7 December) and to stop the conversions. The Montale of La Spezia should be reactivated. Also think about the possibility of evaluating a rapid conversion of some gas plant: I know that many will say that the times would be too long, but the money can, at least in part, compensate for the temples., A solution at least to be evaluated. We then hope for a rainy autumn and winter at night, and sunny during the day, to make hydroelectric and solar work at maximum, but here only those who are higher can help.

So the next step would be a gas cut for industry. Some have suggested a system of reverse auctions, in which those who have the rights of use can sell, for a fee, the same to others. In the short term it could also work, because there are sectors in which the drop in prices, linked to the economic crisis, makes it less convenient to continue production. There would be some economic efficiency, which is better than a quota tout court.

However, if we do not want to abandon the industrial system and enter a period of poverty, and of very unhappy and cold degrowth, we need to work on the supply side. we will see if the cold and the economic crisis or the pro-NATO political conviction will be stronger. There is also no emergency intervention for the exploitation of national energy resources, a truly self-defeating move.

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The article Measures for Gas: a lot of “Gold to the Fatherland”, little or nothing in practice comes from .

This is a machine translation of a post published on Scenari Economici at the URL on Sat, 03 Sep 2022 18:16:58 +0000.