Corrected Copy: Italy Rethinking Nuclear

UNCLAS ROME 001807 SIPDIS E.O. 12958: N/A TAGS: ETRD ENRG IT ITALIAN POLITICS SUBJECT: Corrected Copy: Italy Rethinking Nuclear Energy Policies Summary -------------- ¶1. A surprisingly vigorous debate has emerged in Italy on renewing nuclear power generation, following comments by Prime Minister Berlusconi and others. While Italy's geography limits sites for nuclear plant construction, Embassy energy sector contacts maintain that Italy must reconsider its 1987 ban on nuclear power generation because high energy costs are reducing the country's economic competitiveness. While this debate is unlikely to lead to a full blown civilian nuclear program anytime soon, Italy has already begun rebuilding its nuclear expertise (largely lost after the 1987 ban) and is re-engaging in research, including teaming up with France's EDF in an advanced research program. Moreover, through parastatal electricity conglomerate ENEL, Italy is investing in nuclear plants abroad. Strong GOI support would be necessary to launch a full nuclear program, since the private sector is unlikely to take on the daunting political and economic risks. The current center-right government supports a rethinking of domestic nuclear power generation, while the center-left opposition largely opposes the idea. However, our contacts maintain that even if the centre-left opposition were to return to government, Italy's re-engagement in nuclear programs will not stop. End summary. Background -------------- ¶2. A 1987 national referendum had the practical effect of banning nuclear power generation in Italy. All four existing nuclear plants were closed down and all nuclear research projects, in which Italy reportedly excelled, came to an end. Italy had a solid base of recognized, top-notch nuclear engineers and first-class university nuclear engineering programs. Since 1987, however, almost all such expertise has been lost. Broader research projects spurred by nuclear research also came to a halt. But Senior Officials Are Now Open to the Idea -------------- - ¶3. Somewhat surprisingly, after PM Berlusconi expressed his personal support for reintroducing nuclear energy earlier this year, a vigorous debate has opened in Italy. Italy's Energy Authority Chief Alessandro Ortis (a nuclear engineer) seconded the PM's opinion and said that nuclear energy could help with Italy's electricity prices (among the most expensive in Europe) by bridging the gap between domestic energy production and domestic consumption. Ortis also argued that its high electricity prices made Italy less competitive industrially than many of its EU partners, citing France (where nuclear energy is widely produced) as a prime example. Ortis and many other supporters of nuclear energy generation also underscore that French nuclear plants are so close to the Italian border that opposition based on safety considerations is a very weak argument. Public Perception Has Changed -------------- ¶4. Our Energy Authority contacts argue that, when nuclear power was banned in 1987, Italians did not have an economic perception of the energy sector, but were focusing only on the safety aspects, given the then-recent nuclear accident at Chernobyl. Today, politicians and consumers are more aware that the price and availability of electricity are key to economic growth and that Italy is excessively dependent on electricity imports. A recent poll indicated that public perception has indeed changed: most Italians now believe nuclear power plants would be much more secure than 20 years ago, and 63 percent of Italians would not be against rethinking the 1987 decision. ¶5. Our contacts at the Ministry of Productive Activities (MPA),which has the lead on GOI energy policies, believe that a full return to nuclear power generation in Italy would be very difficult, but perhaps not impossible. Making the correct decision would entail considering nuclear power generation from many perspectives: economic/industrial, social, political, technological, environmental, and financial. Italy Needs a Comprehensive GOI-financed Program -------------- -------------- ¶6. Regarding economic/industrial considerations, Italy would need a comprehensive strategy to construct more than several plants, since it would not make economic sense to build one or two plants only. Our contacts indicate that Italy would need eight to ten years to build even one nuclear plant (including the time necessary both to gain approval and to construct the facility). Building a nuclear plant is not only expensive, but requires a large up-front investment, with profitable returns coming only in the long run. Our contacts thus believe that it is very unlikely that the private sector would finance and take on the risk of such investment. They conclude that a nuclear power generation program would only be possible with direct GOI investment and government guarantees of private sector investment. The GOI would need to contribute to funding: 1) plant construction; 2) adequate security maintenance; and ultimately 3) appropriate dismantling of nuclear plants. A very strong central government role would be needed. Thus, our contacts believe, if Italy continues to decentralize and devolve more powers to Italy's regions through constitutional reform, it will be very hard to program a nuclear "revival." An Alternative to Oil Must Be Found Very Soon -------------- ¶7. That said, there is a strong lobby in support of nuclear power generation in Italy. Many nuclear engineers hold key energy sector jobs. The head of the Energy Authority, two other Energy Authority commissioners, and the very influential Director General for Energy at the MPA, Sergio Garribba, are all nuclear engineers. Similarly, many economists are calling for reconsideration of nuclear power generation in Italy. ¶8. Our contacts also argue that Italy, in particular, but also Europe more generally, will soon be confronted with the increasing costs and possible scarcity of oil as demand from India and China grows sharply. This reality could force Italy to seriously pursue nuclear power generation. Timing is key, our contacts believe, with no more than 10- 15 years before an oil crisis hits the country. The alternative to nuclear, in their view, is coal energy generation. Coal has an advantage over oil in that clean coal technology is advancing rapidly; it is also widely available in many different parts of the world. However, such technology is still expensive and considerable problems remain regarding CO2 emissions, "which brings us back to nuclear," said one of our contacts. Not in My Back Yard -------------- ¶9. Decision-makers will obviously need to consider the social implications of reviving the nuclear option. Energy Authority officials note that ubiquitous NIMBY-ism ("not in my backyard") in Italy is possibly the biggest hurdle to overcome. Italy's geography -- a long, narrow peninsula, with a backbone of mountain chains and densely inhabited coastline -- limits the number of suitable power plant locations. It would be very difficult to find the many locations needed for a comprehensive program without encountering vigorous citizen resistance. One idea circulating is to exempt those living in the communes where the plants would be built from paying electricity bills. ¶10. Another idea EU circles are reportedly discussing is creation of an EU nuclear holding company to acquire all nuclear energy produced in different parts of Europe and redistribute the energy as necessary, thus creating a European level base load which would do away with national monopolies' interests (at least regarding nuclear energy generation). However, our contacts believe it would be very difficult (and impossible in the short term) to obtain the agreement of all EU member states on this, especially as some (particularly France) wish to maintain their competitive advantage over other EU countries. Investment Abroad; Research Is Already Underway -------------- --- ¶11. From a political perspective, our contacts believe Italy will have the political capital to reinvigorate the nuclear option only if the current center-right governing coalition wins the next national elections, due by spring ¶2006. Should a center-left coalition win the 2006 elections, it would not be able to advance a nuclear program, as resistance from parts of its coalition (e.g., the Greens) would be too strong to overcome (although many among its ranks see the advantages of nuclear electricity generation). ¶12. Before the elections take place, one possible strategy is to allow ENEL, Italy's state-controlled electricity conglomerate, to regain expertise and re-build its "muscles" during the remainder of this legislature, mainly by purchasing power plants and participating in research projects abroad. ENEL is already far along in discussions with France's electricity monopoly EDF on becoming a research partner to develop the next generation of nuclear reactors in France. Fifty ENEL engineers are reportedly already working on the project. (Note: Such a partnership would be part of a larger agreement allowing EDF to expand into Italy and allowing ENEL to acquire a percentage of the French electricity market). Another sign of Italy's re- engagement in long-term research is that the national research center ENEA reportedly is regrouping nuclear engineers who had been diverted to other functions. Also Italy's Ministries of Productive Activities and the Environment signed with the U.S. Department of Energy an agreement May 17 on nuclear waste management technologies. ¶13. The 2004 Marzano law (named after former MPA Minister Marzano) now allows Italian companies to invest in nuclear plants abroad (the 1987 referendum prohibited such investments). ENEL, Italy's state-controlled electricity conglomerate, has already purchased two plants in Slovakia, and engineering company Ansaldo is participating in the construction of plants in Romania and Bulgaria. These were described to us as investments of minor economic relevance, but of strong political significance. Our contacts believe that even a center-left GOI would not stop investment abroad or research programs here in Italy. ¶14. Separately, supporters of nuclear power generation also face resistance from Italy's parastatal oil and gas conglomerate ENI. ENI is said to be lobbying hard against ENEL's reopening the "nuclear file," since pursuing a nuclear option would reduce both ENI's market and its political clout. Comment -------------- ¶15. In discussing the possibility of Italy's "rethinking nuclear" with Italian experts, we found strong support for the idea and, further, that such elites view nuclear power generation as the most desirable alternative to oil- generated electricity. However, these experts also believe that the public is still not ready for a full-fledged nuclear program in Italy. Nevertheless, the issue is reemerging as a legitimate topic among many Italians, especially after the countrywide electricity blackout in September 2003 cemented the public perception that Italy has become excessively dependent on foreign electricity imports. ¶16. We share the view that it is highly unlikely Italy will launch a full-fledged nuclear power plant construction program in the short term. Even should the 2006 election go to the center-right, it is not certain that a decision to reinvigorate nuclear energy could overcome major political and social resistance. ¶17. However, the parameters of discussion have widened sufficiently to allow for various options to be discussed, with the likelihood in the short-to-medium term that nuclear energy research will be revived in Italy and that there will be increased Italian investment in nuclear energy projects abroad to diminish Italy's dependence on foreign-owned (although not foreign-produced) electricity. Even if the GOI were to shift to the center-left, we judge that Italy is likely to increase its engagement in nuclear power generation abroad. It is now evident to most Italians that, if nuclear power cannot be produced at home, Italy will need to purchase power from nuclear plants abroad. End comment. Sembler NNNN 2005ROME01807 - Classification: UNCLASSIFIED