Improving European governance to enable investments on the Energy Transition

September 4, 2021

The 2021 edition of the joint research annually carried out by Enel Foundation and The European House - Ambrosetti, in collaboration with Enel, focused on the “European Governance of the Energy Transition: Enabling Investments”, and has just been presented at the Forum held at Villa d’Este in Cernobbio (September 3-4th). Today’s press conference that introduced the study was attended by Valerio De Molli, Managing Partner & CEO di The European House – Ambrosetti, Francesco Starace, Enel CEO and Chairman of Enel Foundation, and Stefano Manservisi, Professor and Member of the international Independent Task Force on Creative Climate Action of the Sciences Po and Senior Fellow of Enel Foundation.

Research shows that an efficient management of the energy transition by improving the governance structure will not only grant the sustainability of the power sector, but also result in positive impacts on the GDP and occupational levels. The study analyzes the state of the progress of the European Union - and Italy more specifically - towards the achievement of the decarbonization goals set for 2030 and the role governance can play in this evolution. The aim was to examine the complex governance system of the energy transition, identifying the weaknesses that need to be addressed in order to have the EU and Italy successfully achieve and benefit from the paradigm shift that needs to take place in the power sector. The research identifies 7 practical proposals to improve such governance structure, grouped into two different levels according to the sphere of action: European (internal and external dimension) and Italian.

Here are the main findings of the study and here the full report.

“The time has come for Europe to rapidly implement the energy transition, to seize the opportunity to revolutionize the perception and management methods of the entire energy sector. This sector has the potential to be the catalyst of a long-term vision for the future - potential of which European institutions are fully aware,” said Valerio De Molli. "

The Next Generation EU, a multiannual plan worth €750 billion serves the purpose of creating a more connected, sustainable and resilient European Union, thus driving the recovery that countries need in the aftermath of COVID-19. Italy is the greatest beneficiary of this plan and allocated €235 billion to the Italian Recovery and Resilience Plan (PNRR), of which 30% stationed for the green revolution.

This all confirms the EU’s commitment and ambition to set a global example when it comes to the energy transition, but the research shows that beside being late on the decarbonization schedule, the frameworks of the current governance system (in terms of institutional responsibilities, duties, relations and processes) do not fit the ambition and the opportunity Europe has in the transition and the magnitude of the effort that we need to make in the years to come.

The reason behind choosing to focus on the most neglected pillar of the Environmental, Social and Governance (ESG) triad lies therefore in governance being a central factor in enabling investments and ensuring a fast and effective energy transition. One of the issues currently faced by Europe is that at its current pace it would meet the new 2030 renewable energy objective set by the “Fit for 55” policy package only by 2043. It was also estimated that closing the €3,564 billion investment gap needed to reach the 2030 target in Europe (€186 billion in Italy) presents could have a cumulative impact on GDP of €8,126 billion (€424 billion in Italy).

Francesco Starace, commented, “Bridging the investment gap with approximately 3,600 billion euros needed to reach the 2030 target in Europe, of which around 190 billion euros in Italy alone, would have a cumulative impact on GDP of over 8,000 billion euros, of which more than 400 billion euros in Italy alone. However, at the current pace, Europe would only hit the new 2030 target on renewables in 2043, which would be too late and a shame to miss such a great opportunity of economic value creation. It is therefore necessary to accelerate and equip ourselves with a governance system, which is adequate to the extent of the challenge and capable of translating intentions into concrete action while leveraging on the enormous opportunities that stem from this commitment.”

The study outlines 5 factors that are limiting the Italian governance in relation to energy transition:

1.    The fragmentation of stakeholders’ responsibilities and competences at all levels

2.    The lack of uniformity of local norms and of local applications of national laws

3.    A weak involvement and commitment of institutions and local communities, that wears away social acceptability

4.    The lack of efficiency of technical-administrative public entities

5.    The fragmentation in sectoral policy design.