Energy

The intricate world of energy

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The paper industry has made tremendous steps in the energy field, from the development of energy efficiency to investments in co-generation and green systems. The way towards a fairer division of costs and carbon neutrality objectives is, however, still long and dotted with obstacles, which are all too often more of a political than a practical nature.

Energy consumption always represents a major part of the budget of Italian paper mills, with a share of electrical energy of 7.3 billion kWh, over 70% of which self-produced in cogeneration, and 2.5 billion of annual cubic metres of natural gas, i.e. over 10% of the consumptions of the entire Italian industry.

These were the topics discussed with Alessandro Bertoglio, manager in charge of the Energy and Transport section of Assocarta, i.e. the professional business association grouping, representing and protecting all the Italian manufacturers of paper, cardboard and paper pastes, who has illustrated the sector’s current situation and the works implemented so far in the field of energy.

The state of the art

The energy situation of the paper industry has remained unchanged even after the pandemic, which has instead affected several other aspects of the economy in general. For instance, in the case of natural gas, which makes up for a significant in consumption in the sector, Bertoglio explains that, though gas prices registered a decrease due to a reduction in consumption, the price difference between Italy and Central-Northern European markets, i.e. around 2 EUR per Mwh, has remained stable. The incidence of price difference on costs is today, instead, even higher for Italian businesses right because of the decrease in the price of the commodity.

These costs add on to the additional burdens, for which, however, a government ordnance is currently awaited. The latter is expected to introduce a reduction of para-fiscal charges, with subsequent reductions in the cost of the gas bill. It is hoped that these ongoing measures are finalized by the end of year, however they are currently being evaluated at a European level.

Towards carbon neutrality: the role of gas

The theme of energy for paper mills is not just a matter of costs, but it is rather part of a series of far-reaching objectives set for the sector also at an international level. Within the framework of the European and world debate, reaching carbon neutrality has, indeed, become of paramount importance. «Achieving carbon neutrality is a medium- to long-term objective, which is certainly not attainable in the short-run, but it is definitely something the sector has always striven for», says Bertoglio, when asked about the position of the paper industry on the matter. «Paper mills have for years worked to increase energy efficiency and, hence, reduce energy intensity. To this end, they have made considerable investments in cogeneration, which makes it possible to use less fuels with the same energy produced and, as a consequence, reduce CO2 emissions in the air. The sector will continue pursuing energy efficiency and has, at the same time, started initiatives to explore other options, as well, like the use of hydrogen in combination with natural gas and the reuse of process waste for on-site energy production, whereby the latter has always been a particularly heartfelt topic within the sector». These two ways might well lead to a significant decrease of the carbon footprint in the sector.

Electrification is a different and somehow more complicated topic. According to Bertoglio, measures in this field are not necessarily likely to positively impact on the general CO2 emission levels in the country. «Furthermore, the problem is also of a structural nature», says the Assocarta manager. «Estimates have shown how upgrading the electrical part at the paper mills side, which would be necessary to provide for the part of electrical energy that is self-produced from the cogeneration process on the one hand, and to avoid resorting to gas on the other, would be infeasible in practice. This enhanced electrification can, therefore, be implemented only partially and can be applied only to some parts of the process. As early as today the network that feeds our industries does not meet their power needs in many cases, so that it is true that the sector resorts to self-production. It is unthinkable that the electric grid can provide the thermal energy that is today provided by methane». The best solution thus appears, once again, to «resort to natural gas, by reducing its weight, notably through the use of biogas and hydrogen, and making the most of already existing facilities».

And as we are talking about energy sources, we couldn’t but ask Bertoglio what role renewables can have, also in view of creating local networks. In Bertoglio’s words, «Renewables are a possibility, especially for high-concentration paper clusters. In this case, centres characterized by the production of energy from renewable energy sources would be created, with this energy distributed to all the industry in the cluster. This is a very interesting prospect that can definitely be pursued, yet one that is currently hampered by the norms preventing large companies to be part of this type of energy communities».

Energy transition and TAP

The carbon neutrality target cannot be achieved, though, without energy transition, and here again natural gas can act as a protagonist. According to Bertoglio, natural gas is an «indispensable protagonist, which will maintain this role also in the future». And for once «Italy plays from an advantaged position compared to the rest of Europe, as our country is imbalanced when it comes to the use of this clean fuel. Furthermore, we will soon have the change to import gas from the South through the TAP (Trans-Adriatic Pipeline), i.e. the new gas pipeline developed under the aegis of European legislation, which will be operational by the end of the year». This important new development will give us more autonomy and safety, also in view of the bottlenecks in imports from the TENP from Northern Europe, which were first registered in 2017 and continue to occur today. The gas pipeline is currently being operated at 50% of its potential due to some damages in the pipes, which required major reconstruction works to be carried out. These maintenance works are expected to end in 2021. Having the TAP in full operation would, therefore, be even more important.

Furthermore, the new gas pipeline could be helpful on the wider front of the country’s energy supply, as it could facilitate the alignment of Italian energy costs with European ones. All of the above is expected to have further repercussions on the energy situation of the paper industry, as it could additionally help improve energy efficiency in the sector and reduce CO2 emissions.

Cogeneration and long-awaited new norms

Cogeneration is yet another big topic. It is ideal for the paper industry, however it has suffered major repercussions due to uncertainty in the norms, which has in fact stopped investments and created problems to the whole sector. The issue of cogeneration is delicate, as stressed also by our interlocutor: «we are currently redefining some rules concerning the energy efficiency certificates, which also affect cogeneration. The old norms defining the objectives set by the Ministry for Economic Development are about to expire, as they foresee obligations until the end of 2020, while the new norms setting new objectives have not yet been defined». To solve this issue, «recent law decree DL Rilancio has a norm that provides for the extension of white certificates until at least the end of 2021». As of the date of this article, though, no implementing provision has been adopted to turn this legally foreseen extension into practice. According to Bertoglio, this measure could facilitate the resumption of investments in cogeneration plants, which have stalled due to the uncertainty in the norms. This uncertainty is accompanied by the stop caused by the interruption of activities during the health emergency, which inevitably caused the stoppage of sites that were already working. Legislative problems, therefore, go hand in hand with the delays in the implementation of some projects.

As regards the white certificates, Assocarta is collaborating with the Italian industrialists’ association Confindustria for the implementation of the energy efficiency certificates scheme. This mechanism is still very valid and no equally effective alternatives are currently available, however it should be changed and improved. Bertoglio explains that «as professional associations, we have put forward a proposal for the reorganisation of the energy efficiency certificates scheme, which aims at giving the scheme a visibility on the short-term market that is currently missing. Reinforcing the energy efficiency certificates system and making it easier to use can positively impact on the cogeneration that currently uses it as a support scheme».

Environmentally harmful subsidies

Energy is a macro-theme, which comprises a series of major issues for the manufacturing industry that have repercussions on the country as a whole. The political issues linked with energy are equally numerous and often difficult to disentangle. They include a particularly delicate issue for the industry, which concerns environmentally harmful subsidies. As explained by Alessandro Bertoglio of Assocarta, these are a set of measures that have been included in a catalogue and foresee a reduction of the energy and gas cost for a number of players; an example of these measures is the so-called norm on energy-intensive uses. In short, these are aid measures foreseen by specific European disciplines on compatible State aid.

The subsidies in question include a particularly relevant one for paper mills, which provides for a reduction in the excise duty on the consumption of natural gas for industrial use. According to Bertoglio, «this measure is currently being targeted by the Ministry for the Environment». The risk is that the Ministry decides to eliminate said reduction. «If this happens, the Italian paper industry will find itself in an even more disadvantaged situation, as the measure would undermine the competitiveness of our paper mills». But this is not all, as such a measure would harm paper recycling and, thus, the circular economy that is assumedly to be be supported. Suffice it to think that, according to a survey carried out by Assocarta, well «90% of recycled paper production comes from the first five European countries that use natural gas, including Italy. The risk is that of a boomerang effect, with a possible lower diffusion of products with a positive carbon footprint». This is a topic that Assocarta and the whole sector are currently working on.

 

 

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