Energy lockdown: in recent weeks we have been talking about it more and more often, especially due to the great instability in the Strait of Hormuz due to the war in Iran. But what does energy lockdown mean? That leave us without energy? That you can no longer leave the house? Talking about lockdown brings to mind what we experienced between 2020 and 2021 with the COVID-19 pandemic. So mandatory mask wearing, no leaving the house, curfew and so on. Well, the energy lockdown has nothing to do with all this. The energy lockdown is a rationing of energy consumption – therefore electricity, natural gas and fuel. Why is this? Because if resources were to become scarce, priority should be allocated to powering key infrastructures – such as hospitals – consequently cutting everything that is not essential. Fortunately for us, no lockdown has been announced, either for the moment, nor is a measure of this type planned for the near future. At the same time, however, the lockdown is a serious issue and therefore it is interesting to understand, in a possible future, what some of the solutions implemented could be.
How the energy lockdown would work in Italy
The first hypotheses put on the table aim to reduce consumption in the transport sector. This is because, alone, the transport sector consumes approximately 34% of all Italian energy. Even according to UNEM forecasts we are around 40% It is the sector that alone consumes the most. So that’s the one to make the most cuts in. For this reason, for example, we are talking about introducing distance learning for schools, or smart working for public employees. These two solutions – already adopted by other countries, as we will see shortly – aim precisely at reducing travel, and therefore consequently reducing consumption.
But not only that: the aim is also to encourage public transport instead of private transport, and it could even lead to the introduction of alternating license plate circulation in larger urban centres. A drastic measure, of course, which for now is only a distant hypothesis but which in reality would not be entirely new: in Italy, for example, it was adopted between 1973 and 1974 during the period of “austerity” and the energy crisis linked, also in that case, to a war in the Middle East.
But that’s not all: the complicated situation in the Strait of Hormuz is also putting the supply of natural gas into crisis, so if things get very bad, the rationing could also directly affect electricity consumption. In fact, let’s remember, to date almost half of all electricity in Italy – between approximately 42 and 44% – is produced from natural gas. So the cuts would concern, for example, non-essential public lighting or, during the summer season, even the use of air conditioners. And even in this case, the measure would not be new: already in 2022, in the midst of the energy crisis due to the Russia-Ukraine conflict, legislation was approved which imposed strict limits on air conditioners in public buildings – therefore in that case not private ones – prohibiting temperatures below 25 °C to cool the interiors.
However, it is worth reiterating that all these are solutions that the Italian government does not plan to implement at the moment because the situation is not yet that serious. This was also confirmed by the Minister of the Environment and Energy Security Gilberto Pichetto Fratin, who declared regarding rationing that “There are not yet the conditions to interveneBy the way, what exactly would these “conditions for intervening” be?
What does the choice to institute a lockdown depend on?
The choice to introduce an energy lockdown or, in general, to adopt certain types of measures, is based on a series of regulations that all European Union states must respect. And as we will see, these regulations and directives change depending on whether we are talking about oil or natural gas. Let’s start with oil.
Petrolium
Every country must have oil reserves. The size of these stocks is not the same for everyone: it must be sufficient to satisfy 61 days of domestic consumption or 90 days of imports. Therefore, depending on the characteristics and habits of the country, the size of the stocks changes. In the case of Italy, pre-conflict reserves in the Middle East amounted to approximately 11,903,843 tons of oil equivalent (TOE), an amount that corresponds to 90 days of net imports. So perfectly within the limits.
But what happens in the event of an energy crisis? That the member countries of the International Energy Agency can decide to release part of their stocks to make up for a possible lack of raw materials and to calm prices. On March 12, through a press release, the MASE, i.e. the Ministry of the Environment and Energy Security, declared that Italy would also join the coordinated release of emergency oil reserves proposed by the International Energy Agency (IEA). But not of all the reserves, only of a small percentage. To be precise, 13.5% of our country’s total safety stocks, equal to 2.5% of the total barrels made available by the Agency’s member countries to deal with a possible oil emergency
This means that, after release, our reserves should amount to approximately 10.2 million tonnes of oil equivalent. However, if, on the contrary, the situation were to worsen, it is possible that these stocks will dwindle, and probably this scenario, sooner or later, would lead the Government to opt for some lockdown measures.
Natural gas
As with oil, here too every country has natural gas reserves. In the case of Italy, to get an idea of how many stocks we have we can consult the GIE database. At the moment this value is equal to 51%, therefore just under half of the maximum capacity. Which isn’t much overall, of course, but if we look at the situation in other European Union countries… in short, we are in the top 3 of the best placed countries, after Portugal and Spain. Unlike oil, however, the emergency system for natural gas works differently and is based on three levels.
The first level is that of early warning, which is triggered when there is concrete and reliable information that an event could create serious problems for the supply of natural gas. For example the outbreak of a war. At this stage no concrete measures have yet been taken, but the situation is being carefully monitored to be ready to react.
The next phase is the alarm phase. In this case the supply situation has already deteriorated, but the market is still able to manage it on its own, without direct state intervention: prices rise, supply contracts are renegotiated, supply and demand rebalance themselves independently.
However, if even this is not sufficient to guarantee the necessary supply, we move on to the third and final level, the actual emergency level. Here non-market measures are introduced – i.e. direct interventions by the State – such as a mandatory reduction in consumption in the industrial sector, eventually also affecting civil and domestic customers. That is us, with the energy lockdown. So let’s say that the energy lockdown is precisely an extraordinary measure that is implemented when everything else has already been cut. And at the moment, as we’ve seen, we have a fair amount of natural gas reserves anyway, so we’re still quite far from there.
However, even if here in Italy it is not yet talked about in concrete terms, the energy lockdown is something that exists, and which is underway right now in some countries around the world due to the blockade of the Strait of Hormuz. We are referring above all to Asia, and specifically to some countries in South-East Asia.
