Intelligence of the system and future of energy. A talk with Francesco Del Pizzo

It is called "system intelligence", and does not refer only to technologies, the way of assembling them and making them available to the operators and users with the best solutions. It means studying the trends, foreseeing their evolution, analysing the market, studying as a consequence the corporate strategies and contributing to the smooth operations of all the players, starting with the regulators. To profit from them all together. This, besides, is the mission of a large "third-party" grid operator. The energy market is a difficult one. But it is open, now as never before, to a beneficial revolution to accompany the environmental transition with all its immense and unavoidable obligations, without depressing either the business or the offer to citizens. Instead, it is creating economic advantages for everyone. Since last June Francesco Del Pizzo has been Terna’s Grid Development Strategies and Dispatching Manager. While the pandemic crisis is fortunately showing some signs of recovery, we outline with him the scenario of the challenge. To look ahead.

The pandemic crisis is showing some signs of recovery. Demand for energy is slowly recovering, renewables are starting to grow again, while thermoelectric capacity is decreasing further and with it the reserve margin, with demand peaks that driven by air conditioning are definitively moving towards the summer seasons. It is a revolution. The electricity system is under pressure, more difficult to govern, even if technologies help us. How is Terna’s strategy changing, evolving?

«There is already much, very much future, in the new business plan that Terna has just published. It is focused on the strategy for efficiency, the increase of renewables and the resilience of the electricity system. To tackle at the same time the transformation in progress and the extraordinary events to guarantee procurement today and the expected evolution. We believe in all this that a grid operator must have a double role: it must develop the infrastructures but must at the same time become, in fact, a "system director", capable of assessing the trends, anticipating them, planning in good time the projects and the correct channelling of investments. In short what is needed is an overall view, which enables us for example to support the correct distribution of electricity production from renewables: where and how they are needed, where they can be more productive compared to different technological solutions, how and how much they can correctly cooperate with traditional generation in this period of transition towards greater environmental compatibility. We should say clearly: as of today there is still no real system capacity. Fortunately there is a scenario that is becoming clear in its outlines, but the operating actions must be defined better, to focus the points of reference but also to support the updating and evolution of regulations in the sector.»

And to focus on where can we and must we start?

«From some certainties that we already have. One above all: an even more significant compression of thermoelectric production will be evident. And we shouldn’t think that as a consequence of this fewer resources will be needed. On the contrary, the new scenario will determine a very different mix of electricity production, with an evident imbalance of the old model, which has to be tackled with great attention to the economic sustainability of the strategies that we put into place. A trend already partially consolidated. For more than a decade no more traditional thermoelectric plants have been built while the activities in the service of the new scenario arise and are being developed. For example in the capacity market, a new sector in full development that needs to find fixed-term investment formulae to find system consistency. Another example, connected to the previous one: storage. We are coming closer to the moment in which they will become essential for the system. They need investments, rules, facilitations in the mechanisms of construction and above all in those of the market, with long-term contracts that are capable of guaranteeing their economic sustainability and therefore their availability.»

What will the market of the future be like? More concentrated or more fragmented, more exposed to competition or inevitably subject to a consolidation?

«Let there be no mistake: the contestable portion of the market will shrink, with many plants with zero variable costs and a stabilisation of the existing capacity. A very different market compared to the past, which will see an accentuation of the trends that are already transforming it, characterised as it is by 55/60% of renewables, by 20% of imports from abroad and for the remaining portion by traditional or in any case containable generation.»

A definitively more open or more closed market?

«To support the benefits of the technological evolution and of the race to renewables the market must in any case be more open not only within but also beyond national borders. In the awareness that all challenges, also in the world of energy, are played increasingly on the international markets. If we want to support a European role for Italy we must therefore conform to and compare ourselves with European rules. Only in this way will the advantages be for everyone. Because the balancing and reserve market, in strong and undeniable development, can be well managed above all on cross-border markets, both for energy and for the connected services. The transformations affect all countries. They redefine the operating borders, those of the business, those of competition. They inevitably upset the balance. Let’s look for example at Germany, engaged in a colossal plan of transition from coal to renewables. With challenges, commitments and opportunities that should be shared. This is why we are trying to give Italy suitable instruments: the capacity market, first of all, together with the rules that must see us increasingly integrated into the international markets.»

Italy is often lagging behind and subordinate. On this front how are we doing?

«Not badly, if we know how to manage the trend that is already in progress correctly. In the final balance of the Italian energy market we shall be net importers, but in the trends of demand for power flows we might be able to seize quite a few opportunities for being energy exporters, for example in the moments of greatest need of our international partners, taking advantage of market conditions favourable to us. Everything depends on the ability to make our strong points count. Because our geographical location enables us to transform ourselves into an energy hub capable of being a bridge between the southern zone of Europe and the other Mediterranean countries, also of the Northern Africa band as well as the Balkans. We must work in this direction.»

Also because the experts are increasingly telling us about the opportunity of increasing the recourse to the electrical factor, in air conditioning but also in transport. Resistance? Obstacles?

«I can’t see any. Or rather, I can’t see resistance that isn’t physiological for all great changes. The electrical vector offers evidently concrete opportunities to increase system efficiency. Electricity operators, but also gas operators are aware of this, and even the mobility industry seems to have definitively acknowledged it. I can’t see great problems in relations between operators of different infrastructures. The market and the technology are guiding the system and this is a good thing. Look at electric cars: they’re developing a good speed at last and it will be precisely this sector that will offer perhaps the most rewarding stimuli for technological evolution, under a scenario of production exchanges that will have as its hinge precisely the storage system that the country must rapidly develop. A complex and technologically sophisticated system, which will be based for around 30% on recharging at public stations while the rest will be through a fragmented system based mostly on personal and flexible systems, starting from domestic ones. The game between producers will change, sure. But our equipment, our habits, the appliances in our homes will also change. For the better, if we know how to do our business well.»