The effect of renewables on the thermoelectric sector makes it a real element of unpredictability in gaging Italian gas consumption, the CEO of ERG Rivara storage Grayson Nash told Platts late Wednesday.
Asked whether Italy needed a new gas storage facility when consumption was falling due to the weak economy, he said: "It is an objective reduction, but temporary," adding: "The one truly unpredictable thing is the thermoelectric sector due to the impact of renewables, which because of bad planning destabilize the system."
Nash said that on the other hand "industrial consumption, apart from the crisis in 2009, has been stable at 14.5 billion cubic meters a year since 2008 and that demand from local grids is subject to the weather as usual".
"The current demand for flexibility has shown Italy needs storage, therefore it needs projects like ours," Nash added.
"In the medium term, we need to take into account the evolution of import contracts, which are themselves a source of flexibility for the Italian market and which I believe will not be renewed on the same terms of 30 or 40 years ago," he said.
The Rivara storage project is being developed in a commercial partnership between UK oil and gas exploration and production company Independent Resources plc -- which is listed on London's AIM market -- and Italian energy group ERG, which holds a 15% stake.
The company has said that containing an estimated 3.2 Bcm of gas, Rivara's effective working capacity could add over 20% to peak deliverability into Italy's supply network during the winter season.
Earlier in March, the project received environmental compatibility authorization from both the Ministry of Environment and Ministry of Cultural Assets and Activities, and is now waiting for the final go-ahead from the Italian Industry Ministry and the Emilia-Romagna Region.
"The administrative process for a project like Rivara is long and unpredictable," Nash said.
"Apart from the discussion on technical matters, which is really complex for storage projects, there's a political side" to the debate "on various levels, so it's hard to say anything more about the schedule, even though this has a negative impact both on costs and on the general safety of the system," Nash said.
Asked whether he feared the project might experience difficulties similar to those of an LNG terminal in Brindisi -- which was dropped by BG Group in March after a 10-year wait for the final go-ahead from the authorities -- he said: "I don't know in detail the situation, but I understand the reasons that brought BG group to quit."
"Foreign investment in this country is low and decreasing" and if the local opposition won in Brindisi "the Italian people will have to pay for the consequences of that," he added.
Nash said however that the Monti government wants to make Italy "the Euro-Mediterranean hub," and is seeing with concern "a system of growth linked to the consent of one interest group, which doesn't work anymore."
Asked on the recent liberalizations measures which have, among other things, reduced strategic storage to increase the amount available to industrial users, Nash said that "the line of the government is correct: the market has shrunk, therefore it is coherent to reduce strategic storage."
He added, however, that apart from strategic storage, there is increasing demand for peak storage in Italy, and that in that context "Rivara, with its 32 million cu m per day of peak, represents an efficient solution."
