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The energy crisis: a challenge among natural gas, oil, and coal

An analysis of problems, consequences, and possible solutions
On February 24, Russia invaded Ukraine and brought back the war in Europe. Our continent not
only has to cope with the lack of military forces but also of energy. Natural gas, oil, and coal are the
three primary resources we import from Russia to heat up and generate electricity. We are highly
dependent on them, and the economic sanctions that the European Union imposed on Russia
stopped the imports and increased the prices.



Natural Gas - 
The context

Europe imports around 155 billion cubic meters of natural gas from Moscow, accounting for around
45% of EU yearly requirements. The rest comes from different directions: the USA, Nigeria,
Algeria, Libya, Iran, Azerbaijan, and Norway.



Italy imports natural gas from the same countries, and uses it in the same way as Europe – to heat 
up and generate electricity. In this specific instance, it is generated by thermal power stations. The main supplier is still Russia, from which our country bought around 29 billion cubic meters yearly, accounting for 40% of Italian requirements. The link with the national net happens in different
places, from Northern to Southern Italy: Tarvisio from Russia, Passo Gries from Norway, Mazzara del Vallo and Gela, respectively, from Algeria and Libya.
Changing an important vector like Russia with another one will be very complicated, "but it will be still possible by making a coordinated effort between diversification and energy improvement",
Alessandro Gilli, ISPI researcher, said. "For example, in 2021, Algeria doubled its supplements for Italy to around 20 billion cubic meters, and the capacity of its gas pipeline could get to 30. It is important to point out that this substitution is already starting: Algerian gas streams to Italy were more than the Russian ones in February. More supplements by gas pipelines could get to Italy by Green Stream from Libya – which works on reduced capacity – and by the possibility to double the
capacity of TAP, the gas pipeline that goes from Azerbaijan to Apulia".

The consequences



The interruption of the importation from the main supplier increased the price of natural gas. From

2012 to the end of 2021, the price was recorded at around 70 cents a cubic meter for an average
family. It got to 137 cents a cubic meter in the last quarter, as shown by the Italian Regulatory
Authority for Energy, Networks and Environment's (ARENA) data.



Therefore, the energy costs increased. In our country, the energy on average cost less than 76 euro

an MW/h. The price remained more or less steady until 2021, when it skyrocketed to 390 MW/H in
March, as shown by the Gestore dei Mercati Energetici, the company owned by the Ministry of
Economic and Finance that operates in power, gas, and environmental markets. The price is more
than doubled for the last quarter, touching 50 cents a KW/h. Inevitably, the purchase prices also
affect the bills: over the last seven years, Italian families have spent on average 20 cents a KW/h.
The possible solutions
Meanwhile, Europe is working out an emergency plan to free itself from Russian natural gas and
get to a more significant energy autonomy, the project called RePowerEu: "We must become independent from Russian oil, coal, and gas. We need to act now to mitigate the impact of rising energy prices, diversify our gas supply for next winter and accelerate the clean energy transition."
In this way, Ursula Von Der Leyen approved the European measures on the energy issue. Still, the plan is about ten essential points at the embryo stage. Some of the most important: the agreement
with the countries that already export natural gas in our continent, such as those mentioned, will  increase the supply by 30 billion cubic meters. Moreover, the EU aims to speed up the development
of the photovoltaic system and wind power generation by slimming down the bureaucracy, as
confirmed by Gili: "A goal that will the subject of a Recommendation of the European Commission
in May. Finally, it will be crucial to launch the Hydrogen Acceleration, which should strongly
increase the production of green hydrogen in Europe and through international partnerships".

The regasification plants


Our country has set the same goals as the EU: on Wednesday, March 16, the Minister for 
Ecological Transition, Roberto Cingolani, spoke at the Senate, reiterating that our country has three years to become independent from Russian gas, which implies a series of significant investments in the sector, even in the short term. In addition to the aspects already highlighted in the RePowerEu, Italy plans to invest in regasification plants, structures in which liquid gas transported inside tanks is returned to its natural state and stored in traditional gas pipelines.
"The Italian government took action through important missions in Qatar, Mozambique, and other countries in West Africa to increase supplies of liquefied gas in Italy. – Gili adds – The United States itself will probably boost its production in the coming months to increase exports to allied countries". However, LNG is not a reliable resource: compared to traditional gas pipelines,
transporting it costs a lot, and, above all, its importation competes with Chinese importation, which
is historically a country that uses a lot of LNG for energy production. The last point is about
regasification plants: at the EU level, Spain has the highest number of plants, but the European network "is not adequately interconnected enough to guarantee the stream of liquefied gas throughout the whole continent, especially from West to East. So new plants are urgently needed," Gili concludes.
Italy is one of the European countries further behind on regasification plants. They are only three: Cavarzere, Livorno, and Panicaglia. The fourth one is currently under construction in Porto Empedocle, which will be completed in three to four years. Thus far, the capacity of these plants is 60%, which means an input capacity into the network of 16 billion cubic meters per year. The Italian government is thinking of increasing these plants' capacity and building new ones offshore
so that it is possible to directly regasify the LNG arrived by ships.

Oil

Libya and its political situation

The energy crisis has highlighted another major problem: oil. Italy imports 13% of its crude oil 
from Russia. It's not a lot compared to Lybia, one of our historic suppliers. A country where internal politics is split between two opposing regional factions, Tripolitania and Cyrenaica: in Tobruk (Cyrenaica) governs Fathi Bashagha, elected by the Libyan House of Representatives and supported by General Khalifa Haftar; instead, the government of Tripoli (Tripolitania) is chaired by Abdul Dabaiba, interim Prime Minister and supported by the United Nations. Currently, between the two authorities, there is no open conflict. Still, in the last few weeks, the situation has seen a recrudescence of violence, with the kidnapping of some ministers and the attack against Dabaiba himself. The situation is made even more unstable by the presence of militias: "They fight for one side or the other, but also to keep their territorial dominion - explains Michela Mercuri, university professor, member of the Observatory on Religious Fundamentalism and Jihadist Terrorism (OFT) and foreign policy analyst - They abuse this situation of uncertainty to create a great chaos, setting all the conditions for an escalation in violence".
For sure, the presence of these armed groups also broaches the subject of the supply of natural resources, especially gas and oil. The latter is still the country's primary resource, as Professor Mercuri pointed out, and the militias control most of the extraction points: "Who controls oil in Libya has the power. The possibility of distributing the oil revenues to the militias and the inhabitants could guarantee the two leaders a greater power and influence on the population". Even
the Petroleum Facilities Guard (PFG), the armed group that is supposed to manage the security of the fields, acts autonomously and, over time, has blocked several wells in Southern Libya  –  particularly during the war between Haftar and al-Sarraj. Therefore, about the energy issue, Mercuri reiterated: "Unfortunately, the interlocutors are still the militias, the actual tiebreaker".

Who controls the oil in Libya?

The fight for black gold and natural gas also involves the palaces of power, with tensions between 
Mohammed Aoun, the Minister of Oil under the Dabaiba government, and Mustafah Sanallah, the chairman of NOC (National oil company). These tensions inevitably involve the various armed groups and could lead to a further decrease in energy supplies. "In only a month, we went from one
million barrels per day to 900 thousand. It is a serious situation", Michela Mercuri said, and she added: "We have a gas pipeline, the Green Stream, which starts from Mellitah and arrives in Gela.
It has the capacity of 8 billion cubic meters capacity but, due to the nation instability, this year only half of it arrived in Italy". Therefore, our country and the other energy interlocutors are risking a crisis.
The possibilities to negotiate diplomatically are meager because, as Mercuri observed, "now the situation in Libya is in the hands of the Libyans and their power games to ensure a leading position in the next elections that are unlikely to be held in this situation of instability". Even Eni, which has always been a privileged interlocutor, had to suspend the important projects that the CEO, Claudio
Descalzi, dealt with Dabaiba and Sanallah in September. There was also the possibility of increasing gas and oil supplies and the project to build new photovoltaic plants. "In these days of chaos, it has become difficult to interact with governments and resume the dialogue – Michela Mercuri said. – Both in terms of the renewable energy and the possibility of oil and NGL
extraction."

Coal
A possible return

If the situation in Libya is increasingly complex, in Italy, other scenarios are opening up. A possible 
coming back to coal is hypothesized to cope with the exponential increase in the cost of gas and oil and the need for energy supply. Prime Minister Mario Draghi expressed this prospect on February 26 in his briefing to the Chamber of Deputies and the Senate of the Republic: "The reopening of coal-fired power plants may be necessary to fill any shortfall in the immediate future". During the
Cop26, which took place in Glasgow from October 31 to November 13, 2021, coal was at the top of the list: the Glasgow Climate Pact, drafted after the Cop26, shows the intention to "gradually reduce the use of the coal and the fundings for the fossil fuels", together with the new minimum goals of decarbonization, by cutting 45% of 2010's carbon emissions by 2030 and reaching net-zero by 2050.

The impact on climate


However, the Pact risks being dissolved: coal provides about one-third of global electricity production and, until new technologies become available, will continue to play a crucial role in industries such as steel. Besides being the largest source of electricity production, coal is at the same time the largest single source of CO2 emissions. Countries committed to eliminating coal- fired generation from their electricity sectors account for only 3.2% of global electricity generation
in 2020. In 2017 even Italy announced in its National Strategic Plan the phase-out by 2025, assuming the shutdown or conversion of the seven remaining coal-fired power plants on its territory. However, the conflict in Ukraine has posed the problem of reopening them.

Coal power plants

Italian coal power plants are in La Spezia, Liguria; in Fusina, Veneto; in Brindisi, Apulia; in Torrevaldigia, Lazio; in Monfalcone, Friuli Venezia Giulia; in Portovesme and in Porto Torres, Sardinia. Five of them are owned by Enel, whereas the Friulian is owned by the Milan energy company A2A and the Sardinian one in Porto Torres is owned by Czech company Ep. In January 2021, the production of coal power plants was about 4,9% of the total amount of the Italian energy requirement.
The gradual stop of coal production was supposed to be balanced out with natural gas.
The last plant to be shut down was the thermoelectric plant in La Spezia, which was shut down three months ago in December 2021. However, the course was reversed by the announcement of the Prime Minister, who declared the temporary reopening, together with that of Monfalcone. The saving of 8 billion cubic meters per year of gas obtained with coal production is limited to the
theoretical argument. In practice, the difficulties related to the restart would decrease the estimate to only 4 billion. In addition, half of the coal used comes from Russia and therefore should be replaced in a short time. All at the considerable cost of 28 million tons of carbon dioxide (equal to 8% of national emissions).

The reactions

Coping with this prospect, the reactions of environmentalists have been strong. From WWF to 
Greenpeace and Legambiente, all agree on the inadmissibility of reopening power plants that are "killers not only of climate but also of human health and economic activity. Coal plants must be closed without ifs and buts. We must take the path of the future."
Renewable energy sources: the only way to the future
"The most valid answer in the long term lies in proceeding expeditiously, as we are doing, in the direction of greater development of renewable sources, and above all with greater simplification of procedures for the installation of plants. I want to point out that the obstacles to a greater speed in this path are not technical or technological, but only bureaucratic", this is how Mario Draghi
continued his speech at the Chamber.

A troubled path
It is precisely the bureaucratic obstacles that, providing long and troubled steps, make our country still far behind on the renewables front. The intention to realize 70 gigawatts from RES (Renewable Energy Sources) by 2030 is far from being achieved: at the moment, we produce less than one gigawatt per year, although the requests for connection to Terna are for 146 gigawatts, i.e., more
than double the amount of those that should be produced. The tortuous approval procedures contribute to slowing down development. In the case of a wind farm or photovoltaic park, there are eleven steps: five authorization steps for the plant, which respectively provide for the "go" from the
Ministry of Environment, the Region, the Conference of Services, the authorization for the specific plant and, finally, the license of the electrical workshop. After these, an additional six are needed to
connect it to Terna's grid (request - estimate and acceptance - preparation of the project - authorizations - acceptance of minimum value - connection contract). All this is estimated in six/seven years, in the best of hypotheses, when the Regions or the superintendences do not veto it.
The prohibition of accumulation contributes to the discouragement of investments, which prevents the energy distributor from storing the energy produced from renewable sources, causing a lack of return on investment and a reduction in the amount of energy available.
This long and articulated process makes it difficult for Italy to keep faith with the intentions launched in the Integrated National Plan for Energy and Climate (PNIEC), published by Mise, at the end of 2019. Aimed at "reconciling industrial development and ecological choices", the project is structured on five lines of integrated intervention, which provide, through decarbonization and the increase of renewable sources (target 30%), the achievement by 2030 of 56% fewer emissions in
the sector of large industry and 35% less in the tertiary and transport.


https://www.reuters.com/business/energy/brimming-european-lng-terminals-have-limited-space-

more-gas-2022-02-17/
https://www.iea.org/reports/a-10-point-plan-to-reduce-the-european-unions-reliance-on-russian-
natural-gas
 
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