Cingolani and the 40% increase in the electricity bill: what’s behind it?

It is difficult to remain impassive in the face of the statements of Roberto Cingolani, Minister of Ecological Transition, when he states: “Last quarter the electricity bill increased by 20%, the next quarter will increase by 40%.” The forecasts are gloomy and the data referring to In conclusion, the quarter is wrong, but let’s move on to the explanation that the Minister gives to explain the increases: “It happens because the price of gas at the international level increases, it happens because the price of CO2 produced also increases.” In summary: the price of the material increases before and the costs of the rights for the emission of carbon dioxide increase, paid by energy companies and energy-intensive companies active in Europe to compensate for the CO2 they release into the atmosphere.

the countermeasures of cingolani

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A scenario that is anything but comforting, with heavy repercussions for consumers in an already complicated historical phase. Cingolani then specified that he had already taken action to defuse the bomb that could explode from October 1, when the prices of electricity and natural gas supplies will be updated: “The government is strongly committed – he says – to mitigate the costs of bills due to these international circumstances and to ensure that the transition to more sustainable energies is rapid and does not penalize families “. If we are working to avert the increases, or at least to mitigate them, why intervene with potentially destabilizing words? Then there are two factors that must be pointed out: only 51% of the electricity consumed in Italy is produced with gas, if we add to this that the item “cost of energy” is worth about 60% of the electricity bill, an increase 40% would seem out of context. Moreover, in the second quarter the tariff increase should have been 20% but was contained to 9.9% by using 1.2 billion of the fund fueled by the sale of the rights to emit CO2 just mentioned.

INCREASING GAS PRICE

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However, Cingolani is right when he says that the price of gas has increased: data in hand, in the last year it has gone from 2,362 dollars / MmBtu to 5,215 (MmBtu is the unit of measurement of gas on the international market, each unit is equivalent to 2,930 MWh); if we extend the horizon to the last five years we are in fact at the absolute maximum, even higher than the 4,612 dollars / MmBtu reached in November 2018. At least, we are far from the 13,921 dollars / MmBtu reached in September 2005, the maximum of the last thirty ‘ years. The reasons are different, but after a collapse to an all-time low due to the lockdowns linked to the pandemic, there has been a rapid recovery in production and consumption. ENEA estimates say that by the end of 2021 we will have recovered 60% of the consumption lost in 2020, with an increase of 30% of oil, 21% of gas and 25% of emissions.

THE WEIGHT OF GAS IN ELECTRICITY PRODUCTION

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What role does gas play in the production of electricity in Italy? The answer is provided by Terna, manager of the national distribution grid: in 2020 52% of the electricity consumed was produced by thermoelectric plants, 31% from renewable energy sources, 5% from biomass; the remaining 12% was imported from abroad, in particular from France and Switzerland. It must also be said that gas-fired power plants remain indispensable since they intervene at times when wind and solar are not enough, for example at night or during peak demand. So yes, the price of gas has increased, but alone it is not enough to justify the hypothesized increases.

SYSTEM CHARGES: THE ANOMALY TO BE ELIMINATED

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As is known, the electricity bill consists of four items: the energy component (about 60% of the total), the costs for the transport and management of the meter (18%), the system charges (10%) and the taxes (10%). That of system charges is probably the most controversial, since it contains a series of costs that are almost never consistent with the production and distribution of electricity. In detail: nuclear safety and territorial compensation measures; incentives for renewable and similar sources; coverage of tariff concessions recognized for the railway sector; support for system research; coverage of the electricity bonus; coverage of concessions for companies with high energy consumption; integration of minor electricity companies and promotion of energy efficiency. A series of improper charges that should be eliminated, a commitment required by the European Union for the approval of the Recovery Fund and which the Draghi government has already said it wants to honor. Also because, some of the measures financed up to now with system charges are recipients of specific funds from the National Recovery and Resilience Plan (NRP). To give an order of ideas, the incentives for renewable sources weigh for 14 billion out of the total 40 which in 2020 represented the accumulation of electricity bills in Italy. All other irrelevant items should be transferred under general taxation.

WHO PAYS THE COST OF CO2?

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A specific item of system charges, directly linked to the energy transition, weighs on the increase in the bill: CO2 emissions rights. Companies that emit carbon dioxide must purchase these rights in the form of certificates, the cost of which is bound to rise as the caps on emissions fall. The “Fit for 55” plan of the European Commission to reduce 55% of emissions by 2030 provides that consumers will also have to purchase certificates for their heating systems and for transport. An element that, when it explodes, will forcefully re-propose the issue of costs linked to the transition. For this reason it is legitimate to ask: it is time to evaluate a national energy plan that takes into account the needs of the various production sectors (from automotive to heavy industry, up to the energy sector) and of sustainability by consumers who will inevitably see costs rise. ? It should be remembered that the energy transition is by no means at no cost; the auto sector, for example, is investing: in 2019 Alix Partners estimated that the automotive industry would have invested in electrification in the following four years at 225 billion. And many more will be needed to center the ambitious plans for European zero-emission ranges by 2030.