US embassy cable - 05ROME1807

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 
 
 
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 2005ROME01807 - Classification: UNCLASSIFIED