According to Carbon Tracker, investing in gas would prevent our country from meeting its climate targets and cost it 11 billion euros over the coming years. According to Carbon Tracker, investing in gas would prevent our country from meeting its climate targets and cost it 11 billion euros over the coming years.
Italy going full throttle on gas? It's not worth it. Not only is it a fossil fuel, and therefore highly damaging to the climate, but it would be an energy source that is out of the market, one that would generate economic losses for the community at large. This is the conclusion of a recent report by Carbon Tracker, a group of financial specialists that illustrates the reality of climate risk in current capital markets. The group produced the study Il rischio di andare a tutto gas – Perché l'Italia dovrebbe investire nel settore dell'energia pulita, in collaboration with the Rocky Mountain Institute (RMI), an independent non-profit organisation that has been working towards a low-coal, zero-emissions future for over thirty years.
The report's key points are fairly clear: plans to build new gas-fired power plants in Italy with a combined capacity of 14 GW could jeopardise the country's climate targets and lead to losses of up to 11 billion euros in investments. "We compared the proposed projects with a portfolio of renewables, showing that more advantageous solutions already exist that make it unnecessary to consider gas as a transitional energy source," Catharina Hillenbrand Von Der Neyen, head of power and utilities at Carbon Tracker, explained to LifeGate. "If gas is treated as such, there is a risk of losing billions of euros in stranded assets. Because these fuels are no longer competitive."
Over the next ten years, utilities are planning to build new gas-fired power plants in response to the so-called coal phase-out (the shutdown of coal-fired thermal power plants), with 5.8 GW of capacity already secured through supply contracts awarded in the capacity market, due to come into service by 2023. However, the study indicates that billions of euros in unrecoverable assets (the so-called "stranded assets") could remain on the balance sheets of electricity operators, resulting in a write-down of equity capital.
"All we did was assess the same electricity output, over the same hours and with the same demand, and compare it with solutions available today, demonstrating that renewables are simply cheaper," Hillenbrand Von Der Neyen continued.
The fact that gas is regarded as a transition fuel for reducing the carbon footprint of the energy sector is nonetheless confirmed by the International Energy Agency (IEA). "Does it make sense to invest in plants that we already know will be out of the market in twenty or thirty years' time? I wouldn't do it," commented the Carbon Tracker representative.
The report also offers solutions. The optimal mix — the renewables portfolio — would consist of 31 per cent solar photovoltaic plants, to generate enough energy for the majority of the day; 17 per cent onshore wind farms, capable of supplying electricity during night-time hours; 16 per cent electrical storage batteries, essential for meeting peak demand; 27 per cent demand reduction; and 9 per cent energy efficiency, achieved through the renovation of old buildings.
In recent weeks there has been a great deal of discussion about the role that hydrogen will play as a key vector for powering the energy transition. Minister for Ecological Transition Cingolani himself confirmed this just a few days ago: "In the energy sector we will need to follow the European road map and install tens of gigawatts of renewable capacity; we will invest heavily in technologies linked to hydrogen. We must lay the foundations for a society that evolves towards the decarbonisation of both secondary and primary energy […]."
"Hydrogen comes around cyclically in the debate," Hillenbrand Von Der Neyen noted. "But it is still a technology that is far too costly. Our view is that it is not needed for generating electricity; rather, it is useful for industrial sectors — such as steel — that find it particularly difficult to reduce their emissions. Especially at a time when we already have cheaper solutions within reach."
Meanwhile, while the study finds that the capacity market has distorted the energy market in favour of both existing and new gas-fired power plants, to the detriment of renewables, Italy's recovery plan is now set to dedicate around 70 billion euros to the energy transition. And it seems fairly clear that gas may not be the right horse to back.