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Italy builds first offshore wind farm amid push for energy independence

Italy is close to completing what is thought to be the first offshore wind farm in the Mediterranean as it tries to free itself from heavy reliance on imported gas.

Italy builds first offshore wind farm amid push for energy independence
Wind turbines under construction at the Taranto offshore wind farm, thought to be the first in the Mediterranean. Photo by Filippo MONTEFORTE / AFP

The Beleolico offshore wind turbine park will stretch out from the port in Taranto, a southern city known for its polluting steel plant, down in the heel of Italy’s boot-shaped peninsula.

Italy’s cabinet has also recently approved six new wind farms to be built on land, from Sardinia to Basilicata.

After being held back for years by red tape, wind farms are now getting the go-ahead as Italy looks to renewable energy as the solution to its energy crisis.

READ ALSO: Italy announces plan to end reliance on Russian gas by 2025

Moscow’s invasion of Ukraine has prompted European Union countries to pledge to reduce dependency on Russian gas.

Italy was among them – despite being one of the EU’s biggest users and importers of gas. At the moment, gas represents 42 percent of energy consumption in the country – which has no nuclear power, just two operational coal plants, and only 20 percent of its energy needs covered by renewables.

Italy imports 95 percent of the gas it uses, and 45 percent of this currently comes from Russia.

The Italian government last week pledged to stop using Russian gas by 2025, with its short-term strategy focused on increasing gas supplies from other countries as well as returning to domestic production.

But an “accelerated investment in renewables… remains the only key strategy in the long term,” Prime Minister Mario Draghi told parliament.

Once complete, the Beleolico wind farm off Taranto will have 10 bottom-fixed, red and white-bladed turbines, capable of powering 21,000 homes.

Renexia, the company behind it, says it also has plans for a vast floating wind farm with 190 turbines off the island of Sicily, which would produce energy for 3.4 million families and create hundreds of jobs.

Photo by Filippo MONTEFORTE / AFP

Italy’s Ministry for the Ecological Transition  has received 64 expressions of interest for floating offshore wind farms — but the number of projects held up by bureaucracy is “staggering”, WindEurope said. Beleolico, which Renexia hopes will be operational by May, has been 14 years in the making.

Greenpeace Italy head Giuseppe Onufrio slammed the delays as “absurd”.

“Some (farms) are authorised after six, seven years, and the technology changes year by year and so the risk is that plants are authorised despite being outdated.”

Draghi insists the government “is working to streamline procedures, cut red tape and speed up investments”.

But Davide Tabarelli, economics professor and head of energy think tank Nomisma Energia, told AFP he was “amazed and stupefied” to see Draghi describe renewables as the “only key strategy”.

Beleolico “is constantly being thrown around as the immediate solution to the energy crisis, and the fact that we can do without gas, especially Russian gas”, he said.

But there are several “serious problems”, he said, not least the difficulties storing wind energy, for suitable batteries do not exist, leading to waste.

Rome’s vow that it is readying to cut the use of Russian gas is remarkable, he added, “as if, after 30 years of promises on renewables, the problem could be solved in the space of a few weeks”.

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UKRAINE

Explained: Why and how Italy will pay for Russian gas in rubles

Italy has said it will comply with Moscow's demand to pay for its gas exports in rubles - so what does that mean exactly? Here's what you need to know.

Explained: Why and how Italy will pay for Russian gas in rubles

What’s going on?

At the end of March, Vladimir Putin issued a demand for countries deemed ‘unfriendly’ to Russia – including all EU member states – to start paying for Russian gas in rubles.

Poland and Bulgaria refused to comply, and Putin cut off their gas supply in retaliation. Finland has said it will join them, and is prepared to lose its own supply as as result.

READ ALSO: Italian energy company to start paying for Russian gas in rubles

Other European countries have been slower to resist. Hungary almost immediately accepted Moscow’s demands, and both France and Germany recently said that they had reached compromises that would allow them to continue receiving Russian gas without breaching EU sanctions.

The Italian energy company Eni, which is 30 percent owned by the Italian state, said in a statement on Tuesday that it was opening separate accounts in both rubles and euros with Russia’s Gazprombank “on a precautionary basis” in order to maintain its gas supply from Russia.

How would the payments work, and how is this different to what’s already in place?

EU countries would technically still be paying Russia in euros, but then authorising Gazprom’s bank to convert the payments into rubles under a system devised by Russia as a workaround that appears to circumvent sanctions.

Here’s the system Moscow’s proposing: foreign companies open two accounts with Gazprombank, the Russia’s third largest bank and the financial arm of the state-owned energy company Gazprom.

The foreign company would pay into the first account, in the currency stipulated in its contract with Gazprom (almost always euros or US dollars), but would authorise Gazprombank to convert the sum into rubles on the Moscow Stock Exchange.

Gazprom's logo on the Adler thermal power plant in Sochi. Putin has demanded that EU countries pay Gazprom in rubles from now on.

Gazprom’s logo on the Adler thermal power plant in Sochi. Putin has demanded that EU countries pay Gazprom in rubles. Photo by YURI KADOBNOV / AFP.

Gazprombank would then move the sum into the second account and make the payment to Gazprom in rubles, at which point the transaction would be considered complete.

Currently, 97 percent of all EU company contracts with Gazprom are in euros or dollars, according to Reuters. Usually, foreign companies would simply pay the energy giant directly in one of these currencies without going through these extra steps.

Why is Italy acceding to Putin’s demands?

Italy is highly dependent on Russian gas. 95 percent of its gas supply comes from imports, and 40 percent of these are from Russia. 

The country has tried to transition to other sources, most recently signing a deal to boost its gas supplies from Algeria. But despite its best efforts, Italy doesn’t anticipate being able to wean itself off Russian gas until 2025.

Eni CEO Claudio Descalzi had initially rejected Russia’s conditions, but on Tuesday the company announced that it had revised its position, saying the decision to open the accounts with Gazprombank was “taken in compliance with the current international sanctions framework”.

Is it a violation of EU sanctions?

The EU seems to be equivocating about whether the scheme is in breach of the bloc’s sanctions against Russia.

On May 13th, the European Commission reportedly issued revised guidelines to member states indicating that they could continue buying Russian gas without violating EU rules – but didn’t address Russia’s demand that buyers open an account in rubles.

READ ALSO: Italy builds first offshore wind farm amid push for energy independence

The EU has yet to issue clear guidance on whether complying with Putin's demands would breach its sanctions.

The EU has yet to issue clear guidance on whether complying with Putin’s demands would breach its sanctions. Photo by Alexander NEMENOV / POOL / AFP.

On Wednesday, however, Commission Vice President Frans Timmerman warned Italy that opening the two accounts was breaking the EU’s rules, calling it “a breach of the stipulated contracts, which say what currency to pay in… The contracts say euros or dollars, never rubles.”

Italy’s Prime Minister Mario Draghi had called on the Commission to clarify its position earlier this month, saying “if there is not clarity or a line of conduct then it is clear that each company or each country will do as it believes fit.”

Why does Putin want to be paid in rubles?

To shore up Russia’s struggling economy by creating more demand for the currency, boosting its value.

By March 7th, just days after Russia began its invasion of Ukraine, the ruble’s value had plummeted by 45 percent. When Putin issued his ultimatum, it quickly rose again – though remained at 22 percent below its value of before February 24th.

The demand has also had the convenient side effect of creating chaos and sowing discord in Europe, as different EU member states with varying degrees of dependency on Russian gas have very different ideas about how the bloc should respond to Moscow’s demands.

How will this affect people living in Italy?

If Italy is allowed to go ahead with Russia’s scheme – as it has already started doing – people in Italy are likely to be unaffected by the change.

Italy would still be paying the amount prescribed in its contracts, in the currency agreed upon in the contracts, so the price paid by the end consumer would remain the same.

READ ALSO: Italy extends energy bill discount and petrol tax cuts

If the EU bars member states from complying with Russia’s demands, countries like Italy and Germany that are particularly dependent on Russian gas will be left scrambling to come up with alternative energy sources faster than they anticipated – which is likely why Brussels has been hesitant about issuing an outright ban.

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