WEEKEND READ: Italy's new generation

Italian industry minister Claudio Scajola gave a speech May 22 in which he asserted that Italy will seek to begin construction on a nuclear power reactor by 2013. If true, the decision would mark a reversal of a 20-year-old ban on nuclear power in Italy.

Although many European countries took their nuclear power systems offline in the two decades following Chernobyl, the energy perspective across the continent is changing. Higher oil and natural gas prices and the desire to wean themselves from Russian energy supplies are causing more countries to look for energy alternatives – of which nuclear power is one of the best candidates.

Following World War II, Italy was an early adopter of nuclear power technology. Construction of the first reactor began in 1958. At the height of Italian nuclear energy in the early 1980s, the country had four reactors online. After the Chernobyl disaster, in 1987, Italians voted in a referendum to ban the use of nuclear energy and the sector remained dormant for more than a decade. There is also an indefinite ban on the construction of new nuclear plants.

While some European countries – notably Germany and Spain – are scaling back their nuclear programs, others are pushing ahead with the construction of new reactors. The use of nuclear energy in Europe is growing for three reasons. First, concerns over greenhouse gas emissions and climate change are prompting a review of energy policies and finding ways to reduce reliance on fossil fuels. Second, Europe gets approximately one–third of its natural gas and crude imports from Russia, a supplier that has shut off the taps before, reducing supplies to parts of Europe. Finally, the skyrocketing price of oil and natural gas makes other energy sources look very attractive.

Italy is a net importer of electricity, getting around 85 percent of its electricity needs from France, Slovenia, and Switzerland. This has two drawbacks for Italy. One, it has essentially relinquished control of its power supply to other countries, and thus has little control over its electricity. In 2003, a tree hit a power line in Switzerland and caused a nationwide blackout for several hours in Italy, which could only wait for the Swiss to bring things back online. The other problem is that imports have made Italian power costs extremely high – 45 percent higher than any other European country, even before energy prices began their steep increase.

Taken together, the new European energy outlook and higher energy costs make domestically-produced electricity look very attractive to the Italians. Furthermore, there are few obstacles in the way of a return to nuclear power.

Although Chernobyl caused a panic over the safety of nuclear power plants, vast improvements in technology and safety standards mean that an accident on the scale of Chernobyl or Three Mile Island are extremely unlikely in a modern nuclear power plant. The public opinion that approved a referendum to ban nuclear energy in 1987 has changed; in a recent Harris poll, 58 percent of Italians were in favour of building new nuclear power plants in their country. Italian prime minister Silvio Berlusconi has also strongly encouraged nuclear energy, calling for a return to nuclear power in 2005 during his first stint as prime minister, and again on May 15.

There is also the question of technical expertise. Italy has been out of the nuclear power game for 20 years, but its largest energy provider, Enel, has not been out of practice. Enel owns a majority of Slovakian electricity major Slovenske Elektrarne, for whom it has constructed and now operates two nuclear power plants. A former state monopoly that was mostly privatised as part of Italy's energy liberalisation program in 2005, Enel is about one-third owned by the Italian government and will most likely be contracted to build the power plant.

A more significant hurdle is the cost of building the new plant. Although its finances have improved slightly, Italy has the world's third-highest debt-to-GDP ratio – 104 percent in 2007 – and growth has slowed to less than 1 per cent a year. Rome does not exactly have the money to build an expensive new nuclear reactor, which could cost several billion dollars. On the other hand, given the cost of electricity imports and energy prices, a nuclear power plant could be the sort of expense Rome is willing to spring for. The government might also open the construction of the plant to bidders or provide incentives for Enel to build the plant on its own euro. Either way, reverting to nuclear power is a decision that makes sense for Italy and faces few – and surmountable – roadblocks.

Stratfor provides intelligence services for individuals, global corporations, and divisions of the US and foreign governments around the world.