Comparison of regulatory framework germany italy

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Comparison of regulatory framework germany italy

  1. 1. 1© Rödl & Partner 05.06.2013 Successful together European Geothermal Congress 2013 Comparison of regulatory framework Germany - Italy Benjamin Richter & Giorgio Castorina | Pisa | 5 June 2013
  2. 2. 2© Rödl & Partner 05.06.2013 Agenda 01 Introduction Rödl & Partner 02 Legal security regarding ownership of geothermal resources 03 Legal security regarding water license 04 Economic feed-in tariffs 05 Priority and guaranteed access to the power grid 06 Legal security regarding district heating prices 07 Drilling and power plant construction licenses 08 Your contact
  3. 3. 3© Rödl & Partner 05.06.2013 Agenda 02 Legal security regarding ownership of geothermal resources 03 Legal security regarding water license 04 Economic feed-in tariffs 05 Priority and guaranteed access to the power grid 06 Legal security regarding district heating prices 07 Drilling and power plant construction licenses 08 Your contact 01 Introduction Rödl & Partner
  4. 4. 4© Rödl & Partner 05.06.2013 Introduction Rödl & Partner We are a one-of-a-kind success story from Germany  Founded in 1977 – international expansion since 1989  Your one-stop shop: audit, legal, management and tax consulting  Most familiar with your culture and language  Tailor-made solutions for internationally active companies  Our interdisciplinary and comprehensive services offer Audit Legal consulting Tax consulting Management and IT consulting Audit Consult Develop Operate In close collaboration with our clients we develop information for well- founded decisions that we implement together
  5. 5. 5© Rödl & Partner 05.06.2013 Introduction Rödl & Partner Rödl & Partner in Europe (excluding Germany) Almaty ▪ Barcelona ▪ Belgrade Birmingham ▪ Bolzano Bratislava ▪ Brno ▪ Bucharest Budapest ▪ Chişinău ▪ Cluj Gdańsk ▪ Gliwice ▪ Istanbul Kaluga ▪ Kharkov ▪ Kiev Krakow ▪ Ljubljana ▪ Madrid Milan ▪ Minsk ▪ Moscow Padua ▪ Paris ▪ Plovdiv Poznań ▪ Prague ▪ Riga Rome ▪ Sochi ▪ Sofia St. Petersburg ▪ Stockholm Tallinn ▪ Tbilisi ▪ Timişoara Vienna ▪ Vilnius ▪ Warsaw Wrocław ▪ Zagreb ▪ Zurich Worldwide 3.500 colleagues - 89 offices - 39 countries
  6. 6. 6© Rödl & Partner 05.06.2013 Rödl & Partner Public Management Consulting (Electricity, gas, heat) Renewable energies Water and wastewater Public sector Hospitals and social economy Public transport Auditing, tax , legal and business advisory
  7. 7. 7© Rödl & Partner 05.06.2013 Introduction Rödl & Partner Our all inclusive package for renewable energy projects Interdisciplinary under one roof! LEGAL TaxLaw Company Law Tenancy Legislation Public Law Attorneys Tax Advisors Business People Auditors Industrial Engineers TÜV certified experts Management Consultants
  8. 8. 8© Rödl & Partner 05.06.2013 Introduction Rödl & Partner Our services for the Energy Sector Energy Sector Legal Consulting Energy Environmental Protection Public Sector Contracts Corporate Labor Public Tender Due Diligence Audit-Related-Services Business Strategy Controlling / Accounting Business Planning Risk Management Mergers & Acquisitions Benchmarking Pricing Tax Consulting Ongoing Tax Matters Consulting in Tax Matters Criminal Law Matters International Tax Consulting Auditing Mandatory and Voluntary Reporting International Financial Reporting IFRS
  9. 9. 9© Rödl & Partner 05.06.2013 Introduction Rödl & Partner Selection of references national and international - Geothermal Energy General information Services Monitoring of the realization of the geothermal project Unterhaching  Complete project management  Subsidy procurement  Development of the worlds first geological risk insurance  Creation of price system for district heating Different municipalities in the field of geothermal energy  Demonstration and evaluation of possible options of action  Estimation of adoption potential  Economic efficiency control / business plan  Valuation  Consideration of legal form  Forms of participation Financing institution  Project control and economical calculations concerning the market entry in geothermal energy UniCredit  Legal, economical and organizational consulting for the creation of a power plant portfolio and its risk management Industrial company  Site selection concerning economical, operative and geological factors as well as the preparation of applications for the backup of the approved area Federal Ministry for the Environment, Nature Conservation and Nuclear Safety  Development of a concept for the realization of a German wide exploration risk insurance
  10. 10. 10© Rödl & Partner 05.06.2013 Introduction Rödl & Partner Selection of references national and international - Geothermal Energy General information Services Federal Ministry for the Environment, Nature Conservation and Nuclear Safety/ World Bank  Development of a benchmarking-study (Pilot project Hungary) World Bank  Examination of two geothermal projects in Kamchatka, Russia, in economical, legal and technical terms (Electricity supply and district heating) GEOFAR  Financed by the Intelligent Energy Europe – Program of the EU;  Joint project with 8 partners from 5 EU-countries;  Topic: Financing system geothermal energy UNEP – United Nations Environmental Programme  Identification of risks that affect the realization and financing of world wide renewable energy projects Industrial companies  Advisory service with regard to market entry Financing institutions  Legal and economical due diligence of projects and portfolios European Commission (Executive Agency for Competitiveness and Innovation (EACI))  Development of a risk mitigation instrument
  11. 11. 11© Rödl & Partner 05.06.2013 Agenda 01 Introduction Rödl & Partner 03 Legal security regarding water license 04 Economic feed-in tariffs 05 Priority and guaranteed access to the power grid 06 Legal security regarding district heating prices 07 Drilling and power plant construction licenses 08 Your contact 02 Legal security regarding ownership of geothermal resources
  12. 12. 12© Rödl & Partner 05.06.2013 Legal security regarding ownership of geothermal resources  Long term security for an exclusive exploration and exploitation of a specific geothermal reservoir is highly important due to high investment costs and project related risk management  Different steps: 1. Determination of the exploration field  allows preliminary geological investigations and exploration drillings 2. Based on these results determination of a sufficiently large exploitation field  secures a long-term exclusive right for exploitation Legal security regarding ownership of geothermal resources
  13. 13. 13© Rödl & Partner 05.06.2013 Legal security regarding ownership of geothermal resources Comparison Germany vs. Italy  Subsoil owned by the state  Exploration permit issued for a period of three up to eight years  Exploitation permit issued for a period of 50 years  Royalty payments of max. 10% can be imposed • Currently not implemented in the case of geothermal resources Germany
  14. 14. 14© Rödl & Partner 05.06.2013 Legal security regarding ownership of geothermal resources Comparison Germany vs. Italy  Land property extends to the subsoil  Resources in the subsoil are owned and kept by the state or the region  Exploitation permit can be issued for a period of 30 years, preferably to the holder of the exploration permit  Plants with nominal power higher than 4 MW are due to pay royalties to the municipalities and region where the plant is located Italy
  15. 15. 15© Rödl & Partner 05.06.2013 Agenda 01 Introduction Rödl & Partner 02 Legal security regarding ownership of geothermal resources 04 Economic feed-in tariffs 05 Priority and guaranteed access to the power grid 06 Legal security regarding district heating prices 07 Drilling and power plant construction licenses 08 Your contact 03 Legal security regarding water license
  16. 16. 16© Rödl & Partner 05.06.2013 Legal security regarding water license  Exploitation permit according to mining law only allows for the exploitation of geothermal energy  Further license necessary for the utilization of water or steam Legal security regarding water license
  17. 17. 17© Rödl & Partner 05.06.2013 Legal security regarding water license Comparison Germany vs. Italy  LAW and REALITY: Legally possible to obtain water licenses for decades  NOT SO LONG: License, generally granted for few years and have to be prolonged on a regular basis  IMPORTANT DETAILS: Proof of disposal of test water necessary Germany
  18. 18. 18© Rödl & Partner 05.06.2013 Legal security regarding water license Comparison Germany vs. Italy  License can be granted for up to 30 years • Same period of validity as for exploitation permit • Security of the investment, once both licenses are obtained  Granted by the province or region upon payment of a yearly fee  No specific prescriptions concerning geothermal fluids and its treatment  Legal claims delegated to the court of public water Italy
  19. 19. 19© Rödl & Partner 05.06.2013 Agenda 01 Introduction Rödl & Partner 02 Legal security regarding ownership of geothermal resources 03 Legal security regarding water license 05 Priority and guaranteed access to the power grid 06 Legal security regarding district heating prices 07 Drilling and power plant construction licenses 08 Your contact 04 Economic feed-in tariffs
  20. 20. 20© Rödl & Partner 05.06.2013 Economic feed-in tariffs  In relation to geothermal power plants, the amount and especially the long-term security of feed-in tariffs play a crucial role due the long project preparation phase  Feed-in tariffs should allow for an adequate risk-award ratio that rewards the relatively high risks of the drilling exploration  Reference value for the concrete regulatory of the feed-in tariff (net vs. gross capacity of the installation) has major influence on the profitability of a project Economic feed-in tariffs
  21. 21. 21© Rödl & Partner 05.06.2013 Economic feed-in tariffs Comparison Germany vs. Italy  Renewable Energy Source Act (EEG) offers in general a stable and secure investment environment • GROSS capacity of the renewable energy technology can be fed into the distribution network • Feed-in tariff for hydro-geothermal power: 25 Ct/kWh • Fixed feed-in tariff secured for 20 years Germany
  22. 22. 22© Rödl & Partner 05.06.2013 Economic feed-in tariffs Comparison Germany vs. Italy  Incentive for the power generated • Added to the income for the sales to the public entity (GSE) • Granted for 20 years • Sliding Feed-in Premium Value of Feed-in tariff MINUS hourly zonal energy market price • Current value: 8.5 – 13.5 Ct/kWh, depending on the nominal power of the plant • Premium tariffs for innovative technologies provided Italy
  23. 23. 23© Rödl & Partner 05.06.2013 Agenda 01 Introduction Rödl & Partner 02 Legal security regarding ownership of geothermal resources 03 Legal security regarding water license 04 Economic feed-in tariffs 06 Legal security regarding district heating prices 07 Drilling and power plant construction licenses 08 Your contact 05 Priority and guaranteed access to the power grid
  24. 24. 24© Rödl & Partner 05.06.2013 Priority and guaranteed access to the power grid  Has to be ensured by all EU Member States (Directive 2009/28/EC on the promotion of the use of energy from renewable sources) Priority and guaranteed access to the power grid  ONE RESPONSABLE: Immediate and priority connection to grid systems shall be granted by grid system operators (GSOs) to installations generating electricity from renewable energy sources (RES) Germany
  25. 25. 25© Rödl & Partner 05.06.2013 Priority and guaranteed access to the power grid Comparison Germany vs. Italy  NOT ALWAYS: GSOs are only then entitled to reduce output of RE plants to prevent a grid overload Germany  NOT FOR FREE: Costs for the connection to the grid are to be borne by the installation operator • The GSO bears the additional costs in case of assigning a grid connection point which is not at the shortest linear distance form the installation
  26. 26. 26© Rödl & Partner 05.06.2013 Priority and guaranteed access to the power grid Comparison Germany vs. Italy  Applications aimed at the connection of RE plants must be given priority by the grid operator Italy  The Energy Authority shall prioritize the dispatch of power generated by RE  Only in cases of high risk for the national grid, the grid operator is entitled to reduce the input of RE plants  Costs for the connection to the grid shall be borne by the installation operator
  27. 27. 27© Rödl & Partner 05.06.2013 Agenda 01 Introduction Rödl & Partner 02 Legal security regarding ownership of geothermal resources 03 Legal security regarding water license 04 Economic feed-in tariffs 05 Priority and guaranteed access to the power grid 07 Drilling and power plant construction licenses 08 Your contact 06 Legal security regarding district heating prices
  28. 28. 28© Rödl & Partner 05.06.2013 Legal security regarding district heating prices  Determination of prices in a way that allows • Achievement of a certain rate of return on the investment • Passing increasing prices to consumers Legal security regarding district heating prices
  29. 29. 29© Rödl & Partner 05.06.2013 Legal security regarding district heating prices Comparison Germany vs. Italy  Any heat supply contract (except for industrial customers) has to be based on the “regulation on general conditions for the supply with district heat” Germany  The price sliding clause should appropriately include: • Development of production and supply costs • Respective circumstances of the heat market  Price is not completely free of any regulation but can be oriented to the present situation of the heat supply costs
  30. 30. 30© Rödl & Partner 05.06.2013 Legal security regarding district heating prices Comparison Germany vs. Italy  Regulatory framework missing. Risks of cartel and monopoly of the operators Italy  Investigations have been started up on 2012 by the “Antitrust Authority”  Due to the expansion of district heating and to the growing attention of the institutions, regulation of the sector in the next years predictable
  31. 31. 31© Rödl & Partner 05.06.2013 Agenda 01 Introduction Rödl & Partner 02 Legal security regarding ownership of geothermal resources 03 Legal security regarding water license 04 Economic feed-in tariffs 05 Priority and guaranteed access to the power grid 06 Legal security regarding district heating prices 08 Your contact 07 Drilling and power plant construction licenses
  32. 32. 32© Rödl & Partner 05.06.2013 Drilling and power plant construction licenses  Licenses for Drilling and building necessary Drilling and power plant construction licenses
  33. 33. 33© Rödl & Partner 05.06.2013 Drilling and power plant construction licenses Comparison Germany vs. Italy  Drilling regulated by mining legislation  Construction of the power plant subject to building law Germany
  34. 34. 34© Rödl & Partner 05.06.2013 Drilling and power plant construction licenses Comparison Germany vs. Italy  Issuance of drilling licenses by: • The respective region (When geothermal resources of national/local interest) • Ministry for Economic Development (For geothermal resources found in territorial waters)  Construction license issued by the region, province or municipality depending on • Plant’s nominal power • Source • D.lgs. 387/2003 created a specific rapid procedure for renewable energies plant (so-called Autorizzazione Unica) Italy
  35. 35. 35© Rödl & Partner 05.06.2013 Agenda 01 Introduction Rödl & Partner 02 Legal security regarding ownership of geothermal resources 03 Legal security regarding water license 04 Economic feed-in tariffs 05 Priority and guaranteed access to the power grid 06 Legal security regarding district heating prices 08 Your contact 07 Conclusions
  36. 36. 36© Rödl & Partner 05.06.2013 Conclusions  Regulatory framework offering legally secure and economic conditions is of utmost importance for the realization of deep-seated geothermal energy projects  This country comparison Italy and Germany illustrates the necessity to gain extensive knowledge on the regulatory conditions of any specific location before taking an investment decision. Disclaimer This presentation contains a general overview of the regulatory framework. It does not represent any suggestions or invitations to act or behave on the market under any circumstances. It does not contain any legal or tax information. Therefore, Rödl & Partner disclaims any liability for correctness, completeness and accurateness of the presentations content. This does not apply, if accountability is based on purpose or gross negligence by Rödl & Partner, as well as possible damage occurred through violation of someone’s existence, body or health.
  37. 37. 37© Rödl & Partner 05.06.2013 „Each and every person counts“ – to the Castellers and to us. Human towers symbolise in a unique way the Rödl & Partner corporate culture. They personify our philosophy of solidarity, balance, courage and team spirit. They stand for the growth that is based on own resources, the growth which has made Rödl & Partner the company we are today. „Força, Equilibri, Valor i Seny“ (strength, equilibrium, valour and common sense) is the Catalan motto of all Castellers, describing their fundamental values very accurately. It is to our liking and also reflects our mentality. Therefore Rödl & Partner embarked on a collaborative journey with the representatives of this long-standing tradition of human towers – Castellers de Barcelona – in May 2011. The association from Barcelona stands, among many other things, for this intangible cultural heritage. Thank you for your Attention! Benjamin Richter Rödl & Partner Denninger Straße 84 D-81925 Munich Phone +49 (89) 928780-350 Fax +49 (89) 928780-300 E-Mail benjamin.richter@roedl.com Giorgio Castorina Rödl & Partner Via Francesco Rismondo 2/E I- 35131 Padova Phone +39 (049) 80 46 911 Fax +39 (049) 80 46 920 E-Mail giorgio.castorina@roedl.it Svenja Bartels Rödl & Partner Via Rismondo 2/E I- 35131 Padova Phone +39 (049) 80 46 911 Fax +49 (049) 80 46 920 E-Mail svenja.bartels@roedl.it Germany Italy
  38. 38. 38© Rödl & Partner 05.06.2013 We and the Castellers de Barcelona The human towers are like us: “every single individual counts” – when working together and when supporting our clients.
  39. 39. European Geothermal Congress 2013 Pisa, Italy, 3-7 June 2013 1 Comparison of regulatory framework Germany / Italy Svenja Bartels1 , Benjamin Richter2 1 Rödl & Partner, Via Nicolò Tommaseo 68, 35131 Padova, Italy 2 Rödl & Partner, Denninger Straße 84, 81925 Munich, Germany benjamin.richter@roedl.de Keywords: Legal security, regulatory framework, economy, Italy, Germany. ABSTRACT For the realization of deep-seated geothermal energy projects a regulatory framework that offers legally secure and economic conditions is of utmost importance. The differences between Germany and Italy shown in the report illustrate the necessity to gain extensive knowledge – besides geological conditions - on the regulatory conditions concerning any specific location to be developed before taking an investment decision. 1. INTRODUCTION The use of geothermal energy can be divided roughly into near-surface or deep-seated geothermal energy. While near-surface utilization of geothermal energy supplies single buildings (or complexes of buildings) with heat by earth heat collectors in combination with heat pumps (depth approx. 15 - 150 m), deep geothermal energy offers the possibility of larger dimensioned energy supplying projects, including the generation of electric power. Deep hydrothermal energy is a special case, because water-bearing layers (aquifers) are used in great depth (2,000 - 5,000 m). For this purpose at least two boreholes are required (production well, reinjection well), because the raised thermal water has to be reinjected into the same layer after being cooled down. The following paper focuses on the five key criteria concerning legal security and therefore necessary regulatory framework conditions that allow for an economic investment into deep-seated hydrothermal energy projects. These criteria are described in detail comparing Germany and Italy in the following. The investigated key criteria are:  Long-term legal security of the ownership of geothermal resources and possible impact on financing of geothermal projects  Legal security that the water licence to exploit the necessary amount for an economic project operation can be issued  Legal security that district heating prices can be determined according to market conditions and are not regulated by public authorities (only limitations to prevent abuse of market power)  Feed-in tariffs sufficient for an economic project operation, which allow for an adequate risk-award ratio  Obligation of e.g. transmission system operators to purchase produced energy, as well as priority access of geothermal power plants to networks (and possibly obligation for network expansion) 2. LEGAL SECURITY REGARDING OWNERSHIP OF GEOTHERMAL RESOURCES From the point of project development and project related risk management as well as due to high investment costs the long-term security for an exclusive exploration and exploitation of a specific geothermal reservoir is of utmost importance for any investor. As long as there is no legally binding definition, other parties could jeopardize realized investments. Possible impacts are lower reservoir temperatures due to intensive use or declining flow rates. In a first step the exploration field would have to be determined and legally secured to allow for preliminary geological investigations or exploration drillings. Based on these results a sufficiently large exploitation field would have to be determined to secure a long-term exclusive right for exploitation (e.g. 50 years). Finally the ownership of the resource has to be allocated for a specific area within the exploitation field. 2.1 Germany In Germany only the holder of the exploration and exploitation permit according to §§ 7 and 8 Federal Mining Act is entitled to apply for the ownership. Furthermore the economic exploitation has to be shown credibly by the applicant. The ownership of the geothermal resource does not comprise the ownership of the landed property. At the moment of awarding the ownership of the geothermal resource the exploitation permit expires concerning the respective area of the exploitation field. Similar to real estates it is possible to enter the ownership of the resource into the land registry and use it to safeguard a credit.
  40. 40. Bartels, Richter 2 2.1 Italy In Italy, the general legislation provides that the landed property extends to the relevant subsoil, with the only exception for its resources. As a matter of fact, due to their public interest nature, they are owned by the State (or by the Region in certain cases) that may grant its exploiting to a private individual by means of an authorization. In particular, for geothermal resources, the recent legislation (D.Lgs. 22/2010) provides an exploration permit (permesso di ricerca) for the research of new geothermal fields, issued for at most 4 years (plus an additional 2 years); in addition it provides the growing permit (concessione di coltivazione) for the exploiting of the discovered resources. In order to guarantee the payback of the incurred investments for the exploration, the exploring private is preferred in the assignment of the relevant exploitation permit, which can be issued for a period of 30 years and renewed after carrying out a competitive tender. Other than in Germany, in Italy the ownership of the resource stays with the State or Region and therefore cannot help to safeguard a credit. 3. LEGAL SECURITY REGARDING WATER LICENCE Since an exploitation permit according to mining law only allows for the exploitation of geothermal energy but does not include the necessary utilization of water or steam a further license according to water legislation is necessary in the context of hydrothermal projects. 3.1 Germany Function of water legislation in Germany is to minimize the utilization of the resource water to secure the natural sources. In contrast the function of mining law is to maximize the utilization of the natural sources. Furthermore in opposition to mining law no legal claim exists in water legislation. But in some German states the mining authority is entitled to override the interests of water legislation. It is legally possible to obtain a license which is valid for decades. But in general the water license will be determinable to only few years and has to be prolonged by an application procedure on a regular basis. Therefore the period of validity of the water licenses is usually considerably lower than the one of the exploitation permit according to mining law and means a further risk in project realization. But in reality up to know all necessary water licenses have been issued for hydro-geothermal projects. 3.1 Italy The water licenses are still regulated by the Regio Decreto 1775/1933. The license is granted by the Province or Region upon payment of a yearly fee. The license is always temporary and it can be granted for a period of 30 years, the same as for the exploitation permit. Therefore, although both licenses are necessary, the equality of their duration guarantees the security of the investment. For the geothermal use of the underground water, the main problem is represented by the lack of a specific legislation in most Regions, delegated by the State to the legislation for the water and soil protection. In such cases, the need of an interpretative application of the general water provisions is often cause of bureaucratic delays. Other than in Germany, the jurisdiction for any legal claim on the water license is delegated to a special court (Tribunale delle acque pubbliche), which competence is extended also to the underground water. 4. LEGAL SECURITY REGARDING DISTRICT HEATING PRICES Any investor needs the security that district heating and district cooling prices can be determined in a way that allows the achievement of a certain rate of return of the investment as well as the possibility of passing increasing prices to the final customers. In case the heat market is not yet completely deregulated and a certain “protection” of the final customer is political objective since heating energy can be considered to be substantial for any person, this leads to certain barriers for investments in this sector. Regulated districted heating prices by public authorities would lead to the following consequences:  a maximization of benefit is not possible  the price could not be adapted to the present supply situation (e.g. required price for combustible as redundancy and peak load)  the price could not be adapted to any investments (restoration, extension) undertaken  the price could not be adapted to the capacities asked by particular costumers  the price would depend on political matters and is influenced by date of elections etc.  the business planning always lacks security, as the planned prices could be changed by the municipal council  a third party, which is not a contracting party in an heat supply contract, has substantial influence on the content of the supply contracts and in succession on sales and benefits of the heat supply company.  the risk of non coverage of heat generation costs would lead to a decline in revenues and profits With reference to a geothermal project, the consequences would be that, even if the main costs (e.g. electricity for pumps) increase in the case of
  41. 41. Bartels, Richter 3 feed-in-tariff - subsidies, the heat supply company has no instrument to equal its losses. 4.1 Germany Any heat supply contract (with exception of industrial costumers (§ 1 para. 2 AVBFernwärmeV)) in Germany has to base on the “regulation on general conditions for the supply with district heat”. In this regulation several aspects of the supply are fixed, e.g.:  type of supply  scope of supply  system of communication if there are unforeseen difficulties with supply  liabilities in case of supply interruptions  calculation of costs for connection to the heating network  utilization of real estate  definitions of interfaces  measurement of heat volume  utilization of heat  etc. The relevant paragraph concerning the price regulations defines among other aspects the following (§24 (4), AVBFernwärmeV):  “The price sliding clause has to be defined in that way, that both, the development of costs of the production and supply of district heat and the respective circumstances on the heat market are included appropriate. It has to disclose the relevant calculation factors completely and in a generally comprehensible form. If the price sliding clause is implemented, the price factor which determines the contribution (in percent) of the costs for combustibles has to be shown separately in any change of price.” The inclusion of a price sliding clause therefore enables the above mentioned balancing of interests. The price cannot be defined completely free of any regulation, but can be oriented to the present situation of the heat supply costs (e.g. combustible price). The price, consequently, not only can be increased by the heat supply company, but also has to be decreased, if the price factors, which are defined in the price sliding clause decline. In consequence, the following advantages can be achieved:  the price is not regulated by any third party  the price always includes the actual development of all influencing factors  the price also has to be decreased if the factors show such a development  the price and its development is transparent for clients. In relation to a geothermal heat supply project, the price, if such a price sliding clause forms the base of a heat supply contract, would in consequence not be effected such strongly by rising price for combustibles as a “conventional” heat supply network leading to an advantageous price stability of the heat sales prices. 4.1 Italy The Italian district heating system, though in a permanent development, is still missing a regulatory framework. Consequently, the prices that operators apply to their customers are not subject to any regulations by central Authorities. For this reason, the antitrust Authority has started up an investigation, in order to avoid that the lack of regulation could cause monopolies of the local operators. The findings of the investigation have not been published yet. It is therefore predictable, according to the spread of the district heating system that the regulation of the sector will be done in the next years. 5. ECONOMIC FEED-IN TARIFFS Any investment always asks for stabile market conditions. Besides the amount of feed-in tariffs especially the long-term security regarding feed-in tariffs would be even more important in relation to a geothermal power plant, as the project preparation phase (time till commissioning) could last several years. Due to the relatively high risks concerning the drilling exploration risks regarding deep-seated geothermal projects, feed-in tariffs have to allow for an adequate risk-award ratio since in most cases a certain amount of venture capital will be necessary in the first phases of project development. A further aspect is the reference value for the calculation of the feed-in tariff. This can either be the net or the gross capacity of the installation. Remuneration only regarding net capacity (energy required for pumps and own consumption of the power plan deducted) has major influence on the profitability of any project. 5.1 Germany For the last years the Renewable Energy Sources Act (EEG) in Germany offered a very stable and secure investment environment for geothermal projects. A statement of course has to be made project specific but in general the rate of the feed-in tariffs can enable an economic project realization especially considering
  42. 42. Bartels, Richter 4 that in Germany the gross capacity of the renewable energy technology can be fed into the distribution network. The feed-in tariff for hydro-geothermal projects presently amounts to 25 Ct/kWh. The energy required for the pumps and for the own consumption of the power plant is taken from the grid at a lower price. The security of fixed feed-in tariffs is furthermore given for a period of 20 years plus year of commissioning. Currently the continuance of the EEG is broadly discussed in Germany. 5.1 Italy The recent legislation on the incentives for renewable energies (Decreto Ministeriale 06.07.2012) offered new investment opportunities to the energy operators. In conjunction with a cut to the incentives granted to photovoltaic, the government reserved new funds to the other sources, among them geothermal. The feed in tariff, granted for 20 years, consists of an incentive for the power generated, which may be added to the incomes for the sale of energy to the public entity (GSE). The current value of the feed in tariffs for the geothermal plants vary within a limits of 0.085 €/kWh and 0.135 €/kWh, depending on the nominal power of the plant. Geothermal plants with nominal power higher than 20 MW, have to undergo a public tender. Altough the tariffs are lower than the ones of the old regime, the legislation is aimed at supporting innovative technologies, recognizing premium tariffs for the reinjection of geothermal fluids, the construction of plants in consequence of new growing permit (concessione di coltivazione) and the realization of plants capable of pulling down the polluting substances of the fluids. 6. PRIORITY AND GUARANTEED ACCESS TO THE POWER GRID According to the Directive 2009/28/EC on the promotion of the use of energy from renewable sources, priority access and guaranteed access for electricity from renewable energy sources are important for integrating renewable energy sources into the internal market in electricity. Priority and guaranteed access to the power grid therefore has to be secured by all EU Member States. 6.1 Germany In Germany grid connection is regulated in the Renewable Energy Sources Act (EEG). According to section 5 EGG, “grid system operators shall immediately and as a priority connect installations generating electricity from renewable energy sources and from mine gas to that point in their grid system (grid connection point) which is suitable in terms of the voltage and which is at the shortest linear distance from the location of the installation if no other grid system has a technically and economically more favourable grid connection point.” Necessary costs for the connection have to be borne by the installation operators. In case the grid operator assigns a different grid connection point, additional costs have to be borne by the grid operator (section 13 EEG). Furthermore costs for optimising, strengthening and expanding the grid system have to be borne by the grid operator (section 14 EEG). Only to prevent cases of grid overload grid operators are entitled to reduce output of renewable energy plants. Grid operators have to “ensure that the largest possible quantity of electricity from renewable energy sources and from combined heat and power generation is being purchased” (section 11 EEG). 6.1 Italy In Italy, the connection to the power grid and the relative procedure to carry out with the grid operator is provided by TICA (Testo Integrato Connessione alla Rete) issued by the the energy Authority (AEEG- Autorità per l’Energia Elettrica e il Gas) by means of the deliberation ARG/elt 99/08. Art. 28 of TICA provides that the grid operator, in pursuance of its services, must give priority to the applications that are aimed to the connection of renewable energy plants and high efficiency cogenerator plants. Furthermore, in Italy, the deregulation of the energy sector has been launched by the Legislative Decree 79/1999 (Decreto Bersani). Its art. 3 provides that the Authority shall ensure the priority on dispatching to the power generated by renewable energies. The same provision has been kept also in the following sectorial legislation (Decree 387/2003). It follows that, when the national grid is endangered due to the surplus of power generated, the energy production can only be limited through the power modulation of the plants fed by fossil sources. Only in cases of high risk for the national grid, the grid operator is entitled to reduce the input of the renewable energy plants.

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