Between fear and hope

Publish date 27-01-2023

by Fabrizio Floris

The so-called energy crisis is the consequence of the war, especially in Italy because about half of the national electricity is produced by burning gas (only 35% is produced from renewable sources, then there are reduced percentages of coal, biomass and imports from France ).

This dependence on gas has resulted in the price of electricity being closely related to the price of gas. The wholesale energy price from May to today has therefore increased tenfold and continues to grow: in the coming months it could be 20 times higher, with the estimated risk that 9 million Italians could spend the winter in the cold (and dark). The price is also high because it is based, as explained by prof. Gianluca Ruggieri of the Insubria University, on a mechanism for the daily sale of energy on the basis of which the operator begins to purchase energy from less expensive sources such as solar from producers, to then move on to hydroelectric energy, wind power and then lastly we move on to the most expensive source, the gas. In the end, however, the price of all energy sources is based on the price of the last purchase, therefore on the highest price. It is the consequence of a mechanism decided within the Power Exchange, but, in addition to the real price trend, there is the financial one. In fact, there is a platform for the delivery of energy derivatives: bets on the future prices of something that you do not have and have no intention of buying, but buy it only to profit from the price differences that may exist between a period and the other.

Yet the stock market values of companies such as Iren are falling because the markets predict that people will not be able to pay their bills and therefore the company will have higher costs because, in any case, the costs of producing electricity and district heating do not decrease if part of the users, but – if revenues decrease due to arrears or disconnected users – the effect will be a further increase in bills to spread production costs over a smaller number of customers.

The real effect of these movements can be seen in the suburbs such as Mirafiori where entire condominiums of 250 families have decided not to restart district heating because they realized that they could not bear the costs and the debt would have been unsustainable.
As explained by Mr. Mario: «Last year I paid €150 a month for 7 months for heating, now the administrator told us that the installments would be €456 a month, so we told him to get the seals put up and close. I don't feel poor, but if I have to pay €3,200 a year for heating, I can't do it».

In contexts where there is high unemployment, precariousness and modest wages, such a sudden and significant growth in costs becomes unsustainable. Giulio is 54 years old, does not work, but receives the basic income (€500) and as of 12 October he has already spent €130 on medicines and food, he has received his heating and rent bill from the ATC (Agenzia for the house) of €309 and says that he doesn't know what to do «because if I pay I would have €61 left and I should get there by the end of the month, but there are 19 days left, what can I do with €3 a day? And then the electricity and the gas have yet to arrive ».

The government has ordered a further package of subsidies (3 billion) which bring aid to 33 billion since the beginning of the year. Contributions which, according to some observers, should be considered investments subtracted from the energy transition. In fact, these are contributions to fossil fuels and then it is a regressive policy because it helps the rich more - who consume more - than the poor, and it also has harmful effects from an environmental point of view.

At European level (also thanks to the push of the Italian government) the option of imposing a ceiling on gas prices is gaining momentum, as well as a reform of the electricity market that decouples the price of electricity produced from renewables (much cheaper) from that coming from burning gas and fossil fuels. A set of situations lined up (war, dependence on gas, rigidity of supply and demand...) and the market was unable to regulate events, indeed in many respects it rode them with speculation.
According to the director general of the International Monetary Fund, Kristalina Georgieva: «For the global economy it is worse than the financial crisis of 2007-2009 [...]. Next year could herald a recession for much of the world.
It is humanity's darkest hour."

The point is, nobody designed our economic system.
It is the result of a complex evolution where capitalism contains all the best and the worst and in many ways these aspects appear inseparable. Technological development, pharmaceutical innovation, fast transport, simplicity of communication go hand in hand with exploitation, inequality, speculation, the impoverishment of land and work. Yet even in this area changes can be glimpsed.
The challenge is to think of the economy as a set of concrete problems, which once correctly identified and understood, can be solved one by one. There are no all-encompassing answers.

The good news is that in addition to the problems there are also solutions: thousands of concrete, practical, daily ideas to make room for change. Consider, for example, the experience of energy communities, families, individuals, public bodies that come together to produce and share energy, but also sociality and awareness. As explained in Laudato si', it is necessary to «slow down a certain pace of production and consumption» in fact, «another mode of progress and development can be created […]. It is about paving the way for different opportunities, which do not imply stopping human creativity and its dream of progress, but rather channeling this energy in a new way» (191).

The second challenge is to listen to people about their aspirations, desires, limitations and capabilities. They have practical knowledge that arises from daily observation and can be decisive in solving everyone's problems. The ability to aspire is the seed of democracy, but perhaps this could be the real crisis that neither the end of the war nor the price of gas can solve, but love can.

Fabrizio Floris
NP November 2022

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