1. (C/NF) SUMMARY: The GOI is creating a nuclear energy
regulatory agency, the first in a series of important steps
in the government's efforts to bring back nuclear energy to
Italy. Much remains to be done: Italy must win public support
for nuclear power and find a solution to the nuclear waste
problem. An October visit by Commissioner Dale Klein of the
U.S. Nuclear Regulatory Commission (NRC) served to reinforce
U.S. and Italian civil nuclear energy cooperation.
Commissioner Klein's visit followed the September signing of
two U.S - Italy nuclear energy cooperation agreements. USG
engagement and re-newed nuclear energy cooperation with Italy
is helping U.S. companies gain space here as alternatives to
French technology. Italy's return to nuclear energy would
strengthen Europe's energy security. We want to ensure that
U.S. firms have the opportunity to participate in the massive
project. Continued USG engagement is needed to advance both
our energy security objectives and our commercial interests
in Italy's return to nuclear power. End Summary.

ITALY TO ESTABLISH NUCLEAR ENERGY REGULATORY FRAMEWORK, BUT
CHALLENGES AHEAD
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2. (SBU) The GOI is in the process of creating the regulatory
framework needed for Italy's return to nuclear power. The GOI
plans to launch by late November the Nuclear Safety Agency
(NSA) as the nuclear sector's regulatory body. Expected
bureaucratic delays, however, may keep the new agency from
being fully operational until after early 2010. The GOI will
also issue over the next six months regulations setting the
criteria for the new nuclear plant sites, compensation
schemes for the regions that will accept nuclear plants,
environmental protection requirements, and a one-step process
in nuclear plant licensing approval. According to GOI
officials, the Italo-French ENEL-EdF consortium that plans to
build four (Areva EPR) nuclear power plants will submit in
early 2011 the request for authorization to start
construction for at least the first plant. The officials said
the GOI has only until then to prepare the regulatory and
institutional framework to handle these applications or those
of other companies that may propose to build nuclear power
stations. They added that it will be a challenge for the GOI
to put all of the regulatory framework in place in such a
short time, but that the government is working to meet that
deadline.



3. (SBU) The GOI officials also cautioned that entrenched
NIMBYism (not in my back yard) and the desire by the Italian
administrative regions to retain authority over the
construction of nuclear power plants may further stall GOI
efforts. They explained that already ten out of the twenty
Italian administrative regions filed a joint legal challenge
to the July nuclear energy law that gave the GOI veto power
over a region that blocks the building of nuclear power
plants. Prior laws give each of the twenty administrative
regions shared approval authority with the GOI over energy
projects, and the regions want to safeguard this authority.
GOI officials added that despite majority Italian support for
nuclear energy, local communities oppose nuclear plants and
nuclear waste sites in their areas.

NRC VISIT REINFORCES U.S.-ITALIAN NUCLEAR ENERGY COOPERATION
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4. (SBU) During a late October Rome visit, the NRC's
Commissioner Dale Klein met with senior GOI officials to
provide advice and to offer Italy NRC assistance in
establishing its new nuclear energy regulatory agency.
Commissioner Klein recommended that the GOI give the new
agency the necessary authority, resources and independence to
guarantee the safety and security of planned nuclear power
plants. He stressed the importance of educating the Italian
public on how nuclear energy can increase Italy's energy

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security. Klein also said NRC technical assistance programs
are available to Italy.



5. (SBU) Ministry of Economic Development Under-Secretary
Stefano Saglia informed Commissioner Klein that Italy is
working to diversify its energy mix away from gas dependency;
the GOI wants increased use of renewable and nuclear energy.
Saglia added that these two energy sources will also lower
Italian carbon-dioxide emissions. Saglia and other GOI
officials agreed to consider the NRC's offer of assistance,
and noted that USG help in establishing Italy's nuclear
regulator would build local public trust in the new agency.

USG COOPERATION ENHANCES OPPORTUNITIES FOR U.S. COMPANIES
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6. (C/NF) U.S.-Italian nuclear energy cooperation is helping
U.S. nuclear energy sector companies get a foothold in the
future Italian nuclear energy market. Italian Minister for
Economic Development Claudio Scajola signed two nuclear
energy cooperation agreements with Energy Secretary Chu and
Department of Commerce U/S Hightower during his September
U.S. visit. Commissioner Klein's visit gave additional
support to U.S. nuclear energy companies. A Post
co-sponsored public forum on nuclear energy featuring
Commissioner Klein as keynote speaker and U.S. companies as
panel members attracted a large audience of senior public and
private Italian officials and local press coverage. These
positive developments have further increased the Italian
profile of U.S. companies and have helped dispel the notion
that the French are the only game in town.



7. (C/NF) Encouraged, U.S. companies continue to position
themselves for opportunities in the Italian nuclear energy
sector. Comments from government and Italian private sector
officials continue to suggest that the Westinghouse AP-1000
nuclear reactor design remains a strong contender for
additional power plants beyond those proposed by the ENEL-EdF
consortium. Westinghouse's partnership with Italy's only
dedicated nuclear energy supplier, Ansaldo Nucleare (AN), is
also looked upon favorably here. Minister Scajola is
particularly keen for AN to play a leading role in the
building of Italy's nuclear power plants as the company is
based in his home region of Liguria. GE-Hitachi told Post it
has also decided to make a stronger push for its technology
in Italy. Other U.S. companies (Exelon, Battelle, Burns and
Roe, Lightbridge and EnergySolutions) remain interested in
Italy.



8. (C/NF) Regulatory uncertainty and the high price of
nuclear power plants may be keeping other energy companies
from committing to build nuclear power plants in Italy. ENI
is the only other Italian company with the resources to do so
on its own. ENI told Post that Minister Scajola has pressed
the company to consider building nuclear power plants with
Westinghouse technology, and that as a result the company is
talking to Westinghouse to assess its options. ENI stressed,
however, that it has not yet made a decision. ENI further
told Post that the company would remain reluctant to build
nuclear power plants in Italy without GOI guarantees
regarding recovery of its investments should a future
government decide to reverse course. Industry rumors suggest
that Milan-based A2A and Germany's EoN may also be mulling
over a decision to form consortia to construct one or more
nuclear power plants. A decision by ENI or other energy
companies to build nuclear power plants here should provide
U.S. companies, particularly GE and Westinghouse, with
important new opportunities for contracts.

COMMENT


--------------------------





9. (C/NF) The next twelve months will be a crucial period as
the GOI will have to establish the regulatory framework to
govern the new nuclear energy sector. Lack of sufficient
expertise and tight financial resources may hamper GOI
efforts to get this framework right. Regulatory efficiency
is not Italy's strong suit. Critics, for example, already

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point out that the new nuclear regulator will start
under-staffed and under-funded. The GOI says it is serious
about forging ahead, but the heavy lifting is only now about
to begin. For now, it appears that the GOI will welcome NRC
and other USG agencies' assistance in its efforts to develop
an effective nuclear energy regulatory framework. The issues
of nuclear power plant financing and investment guarantees
remain important areas for the GOI to address, and for which
USG technical expertise may help. Continued USG engagement
on Italy's nuclear power program will allow us to help keep
on track a project that will benefit European energy
security, while allowing us to help ensure that U.S. firms
are treated fairly in this enormous endeavor. End Comment.
THORNE