Source: Reuters ANALYSIS-Italy speeds up nuclear plans but problems pile up Published: 01 Mar 2009 17:22:22 PST

MILAN, Feb 27 - Italy's plans to relaunch nuclear energy are gathering speed but could stutter because of problems with finding sites and funding, experts said.

Italy, the only Group of Eight industrialised country without nuclear power, is seeking to diversify its energy supplies to reduce heavy dependence on fossil fuel imports. But lifting the nuclear ban is a politically charged issue.

Italy signed a nuclear energy cooperation deal with sector leader France on Tuesday. French power company EDF was enlisted to help Italy's Enel build four nuclear plants in Italy.

"Italy seems to be waking up and trying to change its course and focus on building nuclear plants," said Alessandro Clerici, honorary chairman of the World Energy Council for Italy.

The major obstacles are the absence of a long-term energy policy and grassroot public opposition, he said.

Italians voted in 1987 to shut existing nuclear plants and suspend building new ones after the 1986 Chernobyl disaster.

Prime Minister Silvio Berlusconi's centre-right government has made nuclear energy one of its priorities for energy security and to fight climate change.

However, the plans may be stymied by local authorities who have a final say in approving big industrial projects.

SEND HIM HOME

"No politician in Italy has the power on the local level to say 'We will build a nuclear plant here'. It would mean people who elected him would send him home the next day," said Davide Tabarelli, chairman of the Nomisma Energia think-tank.

Worries about global warming and Europe's dependence on Russia and other resource-rich nations for energy supplies have spurred Sweden to rethink its public vote to phase out nuclear power. Germany may follow its path.

Economic Development Minister Claudio Scajola said this week he expected parliament to approve a law paving the way for the nuclear energy revival in April.

Scajola, who wants Italy to generate 25 percent of its power from nuclear plants, has said he expects a group of nuclear plants to be on stream in 2020.

Italian public opinion has been hostile to nuclear energy, seen as dangerous and costly. Public protests in 2003 forced Rome to scrap plans to store nuclear waste in southern Italy.

The government may try to overrule local opposition through a decree giving Rome power to make final decisions on strategic industrial projects, experts said.

But even then it would be difficult to find technically suitable sites in densely populated Italy.

"Statements that Italy will have nuclear plants operating in 2020 are just political declarations," said Roberto Longo, chairman of Italian renewable energy association APER.

HEY, BIG SPENDER

The government wants private investors to bankroll the nuclear revival which may cost between $3 billion and $6 billion per 1,000-megawatt plant, some industry estimates say. But the economic downturn has made access to funds difficult.

"It can be done using the Finnish consortium model involving developers alongside heavy industrial users who will underwrite offload contracts for baseload energy," said Lorenzo Parola, head of energy and utilities at international law firm Allen & Overy in Milan.

But he added that for the project to be bankable the state needed to take on risks such as siting, waste disposal, accidents and decommissioning. He also pointed to potentially big antitrust risks.

Private investors would also need guarantees that projects would not be scrapped when an opposition government took power.

Enel, Europe's second-biggest utility in installed capacity and which has nuclear capacity abroad, could face problems given its high debt, now at about 61 billion euros.

"Italy needs to build eight to 10 reactors to reach the 25 percent target and Enel would have to build about a quarter of them which means capital spending of around 8 billion euros," one London-based analyst said.

Other candidates to build nuclear power plants in Italy could include Germany's E.ON and Switzerland's EGL and Alpiq, as well as such national players as Edison, A2A and CIR unit Sorgenia.

Utility federation Federutility has also said it is ready to organise a consortium of municipal utilities interested in developing nuclear capacity.

Most of the potential candidates have said they would be interested only if there was clear regulatory and legislative framework in place -- something which could take years to materialise.