US embassy cable - 04ROME43

UNCLAS  ROME 000043 
 
SIPDIS 
 
 
E.O. 12958: N/A 
 
TAGS: ECON, ENRG, IT 
SUBJECT: ENERGY U/S CARD VISIT HIGHLIGHTS BILATERAL ENERGY 
SIMILARITIES, CONCERNS 
 
 
1.  SUMMARY: Department of Energy Undersecretary Robert Card 
stopped in Rome December 10 to meet with key Italian energy 
sector officials, en route to the COP-9 conference in Milan. 
Key issues discussed included generation choices, gas supply, 
greenhouse gas emissions, dependency on energy imports and the 
absence of nuclear energy production in Italy.  Card also 
raised similarities between the two recent blackouts in the 
U.S. and Italy.  Italian energy officials underscored Italy's 
excessive dependency on electricity imports and indicated that 
while plans are underway to add new conventional power plants 
to the national grid, they believe that nuclear energy would be 
the most practical way forward.  However, they conceded that 
popular opposition makes this unlikely for the forseeable 
future.  END SUMMARY. 
 
2. On December 10, U/S Card met separately with Massimo Romano, 
Director of Institutional and International Affairs for Italian 
energy producer ENEL; Carlo Bollino, the Chairman of Italy's 
national power grid operator; GOI Ministry of Industry U/S 
Giovanni Dell'Elce; and with the Chairman-elect of the Italian 
Energy Regulation Authority Alessandro Ortis. 
 
ENEL, THE ELECTRICITY PRODUCTION CONGLOMERATE 
--------------------------------------------- 
 
3. Romano indicated that ENEL is planning to increase its 
domestic production/generation capacity, but also emphasized 
that Italy is now, and will remain heavily dependent on, energy 
imports.  Romano indicated that construction of new plants is 
very difficult, as the NIMBY (Not-In-My-Back-Yard) problem is 
hard to overcome.  Regarding natural gas, ENEL expects to 
benefit from new supplies from Algeria. According to Romano, it 
will be very difficult and expensive for Europe to implement 
the emissions reduction standards specified by the Kyoto 
agreement.  U/S Card and Romano also discussed recent blackouts 
in the U.S. and Italy, stating that both were the result of 
operational failures rather than systemic or technical 
breakdown.  Romano maintained that the principal cause of 
Italy's blackout lay with the Swiss electrical grid operator 
and its connection to the Italian grid. 
 
GRTN, THE NATIONAL GRID OPERATOR 
-------------------------------- 
 
4. Bollino provided U/S Card with greater detail regarding the 
Italian blackout. He, too, maintained that the principal cause 
of the blackout was the slow reaction of the Swiss operator. 
Bollino asked U/S Card for his opinion regarding Italian 
requests to the Swiss operator to implement a protocol 
providing better cooperation.  U/S Card suggested that the 
answer might lie in the extensive modeling and simulation of 
systems, as occurs in the U.S.  Card and Bollino also discussed 
at length Italy's decision to do away with nuclear energy 
production in the late 1980s. In Bollino's view, this decision 
heavily penalized Italy, by depriving it of the cleanest and 
most cost-effective source of energy and forcing Italy to rely 
too heavily on energy imports. Bollino, a nuclear engineer, 
does not envision a return to nuclear energy in the foreseeable 
future because of negative Italian public opinion.  He hopes, 
however, that Italy can still take a leadership role in nuclear 
research. 
 
GOI MINISTRY OF INDUSTRY 
------------------------ 
 
5.  U/S Dell'Elce, U/S Card's GOI counterpart, and his staff 
described ongoing liberalization in Italy. Italy considers 
reducing dependency on energy imports a national security 
issue.  The GOI plans to increase electrical production by 
12,000 Mgwts over the next 3-5 years, thus reducing imports by 
20 percent.  While the GOI also recognizes that nuclear energy 
is not an option in the foreseeable future, it is looking at 
opportunities to create nuclear plants abroad.  (Note: The bulk 
of the energy Italy imports from France happens to be nuclear 
energy.  End note.) Regarding power plants driven by liquid 
natural gas, Dell'Elce said that Italy faces a NIMBY problem. 
However, two new plants are scheduled to be built and come on 
line within the next five years. 
 
ITALY'S NATIONAL ENERGY REGULATORY AUTHORITY 
-------------------------------------------- 
 
6.  Energy Authority Chairman-elect Alessandro Ortis told U/S 
Card that a new law will soon better define the division of 
powers between the Energy Authority and the Ministry of 
Industry. This division is currently vague and has often been 
the source of friction between the two entities.  Ortis 
considers his principal goals as incoming Authority Chairman to 
be enhanced security of the energy supply, creation of a 
 
 
competitive energy market, and respect for the environment. 
Ortis hopes that future blackouts and other energy 
inefficiencies in Europe will be prevented by increased 
information exchange among EU operators, as currently each 
country is responsible for its own system and there is little 
or no international coordination.  Ortis also voiced his 
disappointment that popular opposition prevented "rational 
consideration" of the nuclear option in Italy.  While short- 
term energy supplies were also vital, Ortis is concerned that 
ignoring the nuclear option contributed to a lack of critical 
long-term energy planning. 
 
A FOLLOW-UP INVITATION 
---------------------- 
 
7.  U/S Card extended an invitation to Bollino, Ortis and 
Sergio Garribba (incoming Director General for Energy at the 
Ministry of Industry) for an informal late-January 
brainstorming session in Washington.  (Note: Garribba will 
enter the position Ortis has just vacated when he moved on to 
his new job at the Energy Regulatory Authority.  End note.) 
Bollino and Ortis have accepted in principle, and Bollino's 
office has already been pursuing the matter with Embassy's Econ 
section.  They would like U/S Card to consider January 26 as a 
possible date for the meetings and envision a one and one-half 
day event to include high-level policy meetings as well as 
technical meetings. 
 
COMMENT 
------- 
 
8. In addition to concerns regarding Italy's excessive 
dependence on energy imports and the NIMBY problems, one common 
theme throughout the meetings was the private frustration of 
Italian energy officials over the inability to overcome public 
opposition to nuclear energy.  In this respect, it is 
interesting that the three new key players in the Italian 
public energy sector - Bollino, Garribba and Ortis - are 
nuclear engineers by training.  While we do not expect a change 
in Italian policies relating to nuclear power generation in the 
immediate future, we envision that active research will 
continue.  These officials may try to influence longer-term 
momentum and public opinion aimed at reevaluating the role of 
advanced nuclear energy in Italy's future. END COMMENT. 
 
Skodon 
 
 
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 2004ROME00043 - Classification: UNCLASSIFIED