Europe is struggling with a severe energy crisis. The cost of energy has risen rapidly over the past few months, affecting families and companies. Numerous small businesses are forced to close. As everything relies on energy, the impact of its increasing costs is felt everywhere, independently of latitude or market sector. It is a systemic problem and can only be attacked as a such.
This article focuses on the resilience of the respective energy production systems in France, Germany and Italy. Not surprisingly, Italy has been hit the most (see article). In May 2022, the cost of 1MWh was of 197 Euros in France, 177 in Germany and 230 in Italy. Like in many sectors, Italy lacks a solid strategy when it comes to energy. The energy policy in any country is of strategic importance and is a long-term undertaking, with impacts that can last decades. In Italy, a government lasts on average 1 year and 2 months, leaving little time to implement anything serious, with primary focus on opportunistic election-oriented policies.
Development Indicators provided by the World Bank have been used for the analysis described herein. The most important ones are:
- Combustible renewables and waste (% of total energy)
- Electric power consumption (kWh per capita)
- Electric power transmission and distribution losses (% of output)
- Electricity production from coal sources (% of total)
- Electricity production from hydroelectric sources (% of total)
- Electricity production from natural gas sources (% of total)
- Electricity production from nuclear sources (% of total)
- Electricity production from oil sources (% of total)
- Electricity production from oil, gas and coal sources (% of total)
- Electricity production from renewable sources, excluding hydroelectric (% of total)
- Electricity production from renewable sources, excluding hydroelectric (kWh)
- Energy imports, net (% of energy use)
- Energy intensity level of primary energy (MJ/$2017 PPP GDP)
- Fossil fuel energy consumption (% of total)
- Fuel exports (% of merchandise exports)
- Fuel imports (% of merchandise imports)
- Renewable electricity output (% of total electricity output)
- Renewable energy consumption (% of total final energy consumption)
The data does not include 2022, therefore the results shown herein do not take into account the effects of the conflict in Ukraine. The bad news is that we are looking at resilience at the end of 2021. When 2022 data is available, we will see.
The results, not at all surprising, are as follows:
Of the three major European economies, France is best equipped when it comes to resisting energy-related shocks. France has invested heavily in nuclear energy while Italy imports nearly 70% of its energy. Italy has recklessly abandoned nuclear energy after a parenthesis that lasted from 1963 until 1990 and after an emotional 1987 referendum that followed the 1986 Chernobyl incident. While in France 75% of its energy is from nuclear sources, in Germany this number comes down to 13%. As of today, it is not known if Germany will abort its nuclear U-turn following the 2011 Fukushima incident.
Let us now look at the energy resilience makeup of each country.
The analysis of these three charts will be subject of another article.
An interesting result is obtained when the three countries are combined in a single systemic analysis.
It is clear how the resilience of the combined three countries from an energy production standpoint exhibits a constant downward trend. From 80% in 1974, we are down to 68%. This points to a lack of a common European energy production strategy, confirming the fragmentation of the Union on this and other important fronts.
In the light of this not so optimistic result, it is interesting to note the case of Hungary, with a visibly opposite trend.
The conclusions from this simple study are evident. Europe is increasingly exposed when it comes to energy production. Italy is particularly fragile and will face severe problems in the near future unless a serious long-term strategy is put in place. Italy produces most of its energy from natural gas (40.9%), petroleum (32.9%) and pays for it in dollars. A staggering 77% of Italy’s energy comes from abroad, with Russia being the primary provider (25%). At least that was the case in March 2022. Italy, together with its European partners, should carefully review its foreign policy and establish a sound long-term energy programme, that is able to survive in the face of its endemic and perpetual political turbulence. Energy is everything. Energy is a weapon. It is important not to use it to commit suicide.