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White certificates in Italy: lessons learnt over 12 years of evaluation

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Energy efficiency obligation schemes (EEOs) are used in many EU countries as a policy measure to reach energy efficiency targets. Some of the first EEO (UK, Italy, France, Denmark) have been capable to reach positive results over the years, as shown by the ENSPOL and EPATEE projects.
The Italian mechanism, in particular, is an interesting example of white certificate scheme (WhC), since it is one of the most long-lasting schemes (operatively started in 2005), has ambitious targets, covers all sectors and energy efficiency solutions, and has many flexibility options in place (e.g. non-obliged parties, tradable market, bankability, etc.).
Another point of interest is WhC development over the years. In the first phase, most of the projects were related to buildings with deemed savings as energy savings assessment method. Then the industrial sector rose constantly, till covering 80% of the savings in 2014, mostly assessed through metered savings procedures. In the last three years deemed savings procedures have started to recover, while metered savings have remained the most used energy savings evaluation procedure. This last development was not expected and is mainly due to some regulatory decision and to the modification of the assessment of additionality for many industrial projects categories, due to the diffusion of certain energy efficiency solutions and to changes in the methodological approach.
The presentation, based on a paper presented at the IEPPEC conference in Vienna, illustrates the issues that have arisen over the recent years, and the decisions taken to address them through a major redesign of the Italian scheme that has been introduced with new ministerial guidelines in 2017: many aspects – such as targets, baseline and additionality, saving assessment, and measurement, verification and control procedures – has been deeply affected. The presentation will cover such themes under an evaluation point of view, highlighting the savings achieved with respect to the national targets, how indicators like additional energy savings, costs, and employment have evolved over time, the role of the involved stakeholders (utilities, ESCOs, end-users, etc.), and the effects of tight verification and control procedures.

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White certificates in Italy: lessons learnt over 12 years of evaluation

  1. 1. White certificates in Italy: lessons learnt over 12 years of evaluation Dario Di Santo, FIRE Vienna, 26 June 2018
  2. 2. X www.fire-italia.org The Italian Federation for the Rational use of Energy is a no-profit association founded in 1987 that promotes energy efficiency, supporting energy manager, ESCOs and other companies dealing with energy. Besides the activities directed to its members, FIRE operates under an implementing agreement with the Ministry of Economic Development to manage the Italian energy manager network since 1992. In order to promote energy efficiency FIRE cooperates and deals with public authorities, energy technology and service companies, consultants, medium and large consumers, universities and associations to promote best practices and improve the legislation. FIRE manages SECEM - an accredited body under ISO 17024 - to certify Energy management experts (EGE - UNI CEI 11339). FIRE: the association for energy efficiency
  3. 3. X FIRE: the association for energy efficiency Some members of FIRE: Sviluppo Sostenibile, Albapower S.p.A., Albasolar s.r.l., Alpiq Intec S.p.A., AMIA S.p.A., AMIAT S.p.A., Atlas Copco S.p.A., Avvenia s.r.l., Axpo Italia S.p.A., Azienda provinciale per i servizi sanitari TN, Banca Mediolanum S.p.A., Banca Popolare di Sondrio, Beghelli S.p.A., Berco S.p.A., Bit Energia s.r.l., Bosch Energy and Building Solutions Italy s.r.l., Brembo S.p.A., Cabot Italiana S.p.A., Carbotermo S.p.A., Carraro S.p.A., Carrefour Italia S.p.A., Centria s.r.l., Comau S.p.A., Compagnia Generale Trattori S.p.A., Consul System S.p.A., CPL Concordia soc. coop., Credito Emiliano S.p.A., CTI Energia e Ambiente, DBA Progetti S.p.A., DNV GL Business Assurance Italia s.r.l., Edilvì S.p.A., Edison Energy Solutions S.p.A., Electrade S.p.A., Elettra - Sincrotrone Trieste S.p.A., Enarkè associati, Enel Energia S.p.A., Energhe S.p.A., Energika s.r.l., Energon Esco s.r.l., Energy Saving s.r.l., Energy Team S.p.A., Engie Servizi S.p.A., ENI S.p.A., Estra Clima s.r.l., Fedabo S.p.A., Fenice S.p.A., Ferrari S.p.A., Ferriere Nord S.p.A., Fiera Milano S.p.A., Finco, Finstral AG S.p.A., Gewiss S.p.A., Gruppo Società Gas Rimini S.p.A., Hera S.p.A., Hitachi Drives and Automation s.r.l., Holcim S.p.A., Ilsa S.p.A., Intesa Sanpaolo S.p.A., Iplom S.p.A., IRBM Science Park S.p.A., ISAB s.r.l., Italcementi S.p.A., Italgas Reti S.p.A., Italgraniti Group S.p.A., Kairos s.r.l., Lidl Italia s.r.l., Loclain s.r.l., Manutencoop Facility Management S.p.A., Marche Multiservizi S.p.A., Mater- Biopolymer s.r.l., Mediamarket S.p.A., MM S.p.A., Montello S.p.A., Munksjo Italia S.p.A., NBI S.p.A., Pasta Zara S.p.A., Politecnico di Torino - Dip. di Energetica, Polynt S.p.A., Publiacqua S.p.A., Raffineria di Milazzo S.C. p. A., RAI - Radiotelevisione Italiana S.p.A., Rete Ferroviaria Italiana S.p.A., Roquette Italia S.p.A., S.p.A. Egidio Galbani, San Marco Bioenergie S.p.A., Sandoz Industrial Products S.p.A., Schneider Electric S.p.A., SDA Express Courier S.p.A., Seaside s.r.l., Siena Ambiente S.p.A., Siram S.p.A., Solvay Energy Services s.r.l., Studio Botta, Tecno s.r.l., Thales Alenia Space Italia S.p.A., Tholos s.r.l., Trenitalia S.p.A., Trenord s.r.l., Trentino Trasporti S.p.A., Turboden s.r.l., Università di Genova - DITEN, Università Campus Biomedico, Università Cattolica del Sacro Cuore, Wind Tre S.p.A., Yanmar R&D Europe s.r.l., Yousave S.p.A. Our membership include organisations and professionals both from the supply and the demand side of energy efficiency services and solutions. Other 450 members, almost equally divided between organisations and professional.
  4. 4. X 4 FIRE: the association for energy efficiency Besides being involved in many European projects, listed next, FIRE implement surveys and market studies on energy related topics, information and dissemination campaigns, and advanced training. Some of FIRE clients over the years: Ministry of Environment, ENEA, GSE, RSE, large organizations (such as Centria, ENEL, Ferrovie dello Stato, FIAT, Finmeccanica, Galbani, H3G, Poste Italiane, Telecom Italia, Unioncamere), universities, associations, energy agencies and exhibition organizers. www.fire-italia.org On-going and just completed EU projects:
  5. 5. The scheme basics: EEO + WhC trade 5 Demand WhC is an EEO DSOs have to meet energy saving targets Certificates can be traded on the market Voluntary parties (small DSOs, ESCOs and companies with energy management expert or EnMS) can also obtain certificates Supply WhC is partly an incentive 1 WhC = 1 addi*onal toe All sectors and all energy efficiency projects are allowed. Source: FIRE. The Italian scheme is an EEO scheme with many flexibility options (voluntary parties, exchange market, possibility for DSOs to achieve 60% of target to be recovered in the next 2 years, etc.).
  6. 6. Some base points under 2017 guidelines 6 Energy savings evaluation methods starting from May 2017: Standard projects (SP – a mix of deemed savings and metered savings). Savings are calculated based both on the installed units and the measurements done on a statistically representative sample. Monitoring plans projects (MPP – a type of metered savings). Savings are measured according to an algorithm and a set of meters (both for energy consumption and adjustment factors). With the new guidelines additional requirements were introduced for the consumption baseline that has to be based on meters capable of at least daily measures of the savings and on recorded data for at least one year. WhC lifetime: With previous guidelines: 5 years with tau coefficient.
  7. 7. Additionality 7 0 20 40 60 80 100 120 Ex-ante baseline Adjusted baseline Market-adjusted baseline Standard-adjusted baseline Ex-post consumption Energy consumption baselines and energy savings Additional energy savings Source: FIRE. Non-additional energy savings Steps: evaluation of ex-ante baseline through 1-year measurements; a d j u s t e d b a s e l i n e (production, climate, occupation, etc.), which can be higher or lower than ex-ante baseline; evaluation of market (average of actual market offer) and standard (minimum legislative requirements) adjusted baselines; definition of additional savings. Activity to be done on a per-project basis. C l e a r l y a r e s t r i c t i v e definition of additionality. Evaluation of additionality starting from May 2017:
  8. 8. From EE project to white certificates 8 GSE first evaluates the project proposal, then t h e r e q u e s t f o r c e r t i f i c a t i o n . B o t h include a thorough a n a l y s i s o f t h e submitted documents and of the proposed algorithm, consumption baseline, additionality, meters, etc. Proposals are submitted through a web platform. Even if a project is approved, GSE can make extended verifications. Source: FIRE.
  9. 9. Verification process 9 Source: FIRE. On-site verification has been used less than expected, in fact, especially with standard projects. Documental verification are usually quite demanding, leading often to the rejection of the proposal and to legal dispute (90 rulings of Lazio’s administrative court, of which 58 in 2018 so far).
  10. 10. Public reports on verifications 10 http://bancadativerifiche.gse.it All data about positive and negative documental and on-site verifications are available. In 2017 2,954 verifications were implemented, of which 37 on-site. In the same year 1,539 verification procedures were concluded, of which 9 7 % w i t h a n e g a t i v e outcome and a request of refund of 100 M€. Most of the issues arose from standard projects.
  11. 11. Outcomes of projects’ evaluation 11 The main issues incurred in the verification and control process are: issues with consumption baseline and additionality (often not a clear aspect); insufficient information and/or documentation on the project; issues related to the closure or modification of plants prior the end of the technical life; large frauds emerged in 2017 with SPs (around 700 million euros over WhC lifetime). 53% 38% 7% 1% MPPs 2016: 815 Approved Rejected Other Under evaluation Source: FIRE on GSE data. 81% 17% 2% 0% CRs 2016: 11.709 Approved Rejected Other Under evaluation Source: FIRE on GSE data. 54% 41% 4% 1% MPPs 2015: 999 Approved Rejected Other Under evaluation Source: FIRE on GSE data. 90% 7% 2% 1% CRs 2015: 10.765 Approved Rejected Other Under evaluation Source: FIRE on GSE data. 38% 49% 3% 10% MPPs 2017: 364 Updated on June 14, 2018 Approved Rejected Other Under evaluation Source: FIRE on GSE data. 59% 31% 5% 5% CRs 2017: 5.339 Updated on June 14, 2018 Approved Rejected Other Under evaluation Source: FIRE on GSE data. 38% 49% 3% 10% PPPM 2018: 364 Updated on June 14, 2018 Approved Rejected Other Under evaluation Source: FIRE on GSE data. 45% 1%1% 53% CRs 2018: 1.145 Updated on June 14, 2018 Approved Rejected Other Under evaluation Source: FIRE on GSE data.
  12. 12. 0 200 400 600 800 1.000 1.200 1.400 1.600 1.800 2.000 0 20 40 60 80 100 120 140 160 180 200 January2016 February2016 M arch 2016 April2016 M ay2016 June 2016July2016 August2016 Septem ber2016 October2016 Novem ber2016 Decem ber2016 January2017 February2017 M arch 2017 April2017 M ay2017 June 2017July2017 August2017 Septem ber2017 October2017 Novem ber2017 Decem ber2017 January2018 February2018 M arch 2018 April2018 CRs MPPs Proposals presented 2016-2017-2018 MPPs MPPs (new guidelines) CRs Source: FIRE on GSE data. Proposals trend 12 Reduction of CRs and MPPs due to the evolution of the additionality requirements and to the increasing complexity of the rules.
  13. 13. WhC and EED art. 7 targets 13 0,0 5,0 10,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 White certificates targets and achievements (updated at the end of May 2018) Target (million WhC) Updated targets (million WhC) Issued WhC 31/5-1/6 (million WhC) Savings (Mtoe) FIRE on GME data. Italian notification on EED art. 7: 25.8 Mtoe cumulated. In 2017 4.2 Mtoe cumulated delivered through WhC (56%). Two points to be noticed: the growing residual target, l i n k e d t o t h e u s e o f flexibility from DSOs due to insufficient supply; the stagnating additional energy savings (mainly due t o e v o l v i n g r u l e s o n eligibility and additionality).
  14. 14. WhC price over time 14 0 100 200 300 400 500 07/03/0607/06/0607/09/06 07/12/06 07/03/0707/06/0707/09/07 07/12/07 07/03/0807/06/0807/09/08 07/12/08 07/03/0907/06/0907/09/09 07/12/09 07/03/1007/06/1007/09/10 07/12/10 07/03/1107/06/1107/09/11 07/12/11 07/03/1207/06/1207/09/12 07/12/12 07/03/1307/06/1307/09/13 07/12/13 07/03/1407/06/1407/09/14 07/12/14 07/03/1507/06/1507/09/15 07/12/15 07/03/1607/06/1607/09/16 07/12/16 07/03/1707/06/1707/09/17 07/12/17 07/03/18 WhC'sprice(Euro/certificate) Market session data WhC market price trend "May 31st session" "DSO's reimbursement" "Other fuels savings" "Gas savings" "Electricity savings" Source: FIRE evaluation based on GME data Important points on market: r e i m b u r s e m e n t f o r obliged DSOs based on previous year weighted average market price; three critical price periods o v e r t i m e s h o w i n g intrinsic instability. 1 2 3 Changes with new guidelines: no more tau coefficient; longer WhC lifetime (period over which certificates are issued based on measured savings); as a result, less certificated per saved toe (from 3,340 toe per project to 277).
  15. 15. WhC market: handle with care! 15 Source: FIRE. Attention must be placed in the design of the market, especially if a long time is needed before the supply side can produce new projects and/or if the obliged subjects are reimbursed (instead of passing the costs to their clients). The impact of rules shall be evaluated with care ex-ante, if possible. Frauds, which are a possibility especially with simplified energy savings procedures such as deemed savings methodologies, can rapidly change the amount of white certificates on the market.
  16. 16. WhC scheme cost and other results 16 According to GSE fiscal documents, the cost of information, evaluation, and control has been around 14 million euros in 2016. Other evaluation from GSE: over 2 million additional t o e / y e a r o f e n e r g y savings; over 6 million tCO2/year; 11,000 equivalent direct and indirect jobs; 1 b i l l i o n e u r o s o f investment; 0.7 billion euros of added value.
  17. 17. Main results 17 Around 48 million WhC issued and 26 Mtoe delivered by 2017; ESCOs have been the main actor in presenting projects both in terms of proposals (96%) and of toe (70%, whereas 25% come from end-user companies and 5% from DSOs); ≈60% of those savings have been metered and ≈57% have been linked to monitoring plan projects; Lot of data achieved through MPPs leading to a huge and detailed projects’ database, even if some data are not easy to categorise; Capability to promote industrial energy efficiency projects linked to manufacturing process improvements; Success in dealing with a growing proposals trend (11,709 CRs presented in 2016 and 815 MPPs VS ≈150 in 2007 and ≈550 in 2012). Over 12 years of working time (it’s the longer-life scheme for energy efficiency available in Italy).
  18. 18. Main issues 18 Low materiality for industrial projects till 2013; Over incentivising for some industrial projects initially managed by modifying eligibility criteria, then by changing additionality on-the-run (not good…), then again through eligibility; Consumption baseline requirements and proposals deadline are quite strict with 2017 guidelines; Additionality integrated in the scheme and evaluated on a per-project basis is difficult to manage, especially for industrial project, less standardised than buildings and transport ones; Complexity improves projects quality and qualifies operators, but needs support in terms of information and training; Target setting is difficult and requires caution and/or strong flexibility in place; WhC market is theoretically a good concept, but practically too inelastic to work outside equilibrium Frauds can be a real issue with standardised projects.
  19. 19. The WhC legislative path 19 2004 D.Lgs. 79/1999 DSOs should be put under an EE obligation scheme. 1999 ARERA 103/03 WhC operative guidelines. 2003 D.M. 24/4/2011 WhC scheme introduction. 2001 Source: FIRE. D.M. 20/7/2014 Targets fix and improvements. D.M. 21/12/2017 New guidelines (targets, reimbursement for other fuels, etc.). 2007 ARERA 9/11 Introduction of the tau coefficient. 2011 2017 D.M. 28/12/2012 New guidelines (targets, new deadlines for proposals, GSE as managing authority, etc.). 2012 D.M. 11/1/2017 New guidelines (targets, new control and verification procedure, no more tau coefficient, limits to eligible projects, etc.). D.M. XXX New additionality, enhanced flexibility for DSOs, reimbursement cap, etc. 2018 A complex scheme like the Italian WhC needs frequent updates and fixes. Sought effects often require time to be obtained.
  20. 20. Conclusion 20 The Italian scheme faced in twelve years of activity many issues. Some of them were solved, others were unexpectedly created. The scheme has succeeded in producing interesting targets, covering a wide variety of sectors and technologies, and in spreading the know-how of industrial energy efficiency solutions among ESCOs and practitioners. The exhaustive information required to present projects made the scheme complex and affected its usability, but also provided reliable energy saving assessment and a lot of data on the transformation of the industrial sector. The availability of a strong monitoring and of continuous evaluation made by ARERA, GSE, ENEA is a key aspect of the scheme. Nevertheless, sufficient time and resources should be devoted to the management and improvement of such schemes, and that’s not something evaluation can provide.
  21. 21. Abbreviation list ARERA: Regulatory Authority for Energy, Grids, and Environment CEI: Italian electrical standardization body D.M. and D.Lgs.: ministerial and legislative decree DSO: Distribution System Organisation ENEA: Italian National Agency for New Technologies, Energy and Sustainable Economic Development. EN: European technical standard EnMS: Energy management system ESCO: Energy Service Company FIRE: Italian Federation for energy efficiency GME: Electric market management body GSE: Energy service management body MATTM: Ministry of environment MiSE: Ministry of economic development RSE: Research on the electric system body toe: ton of oil equivalent UNI: Italian standardization body WhC: White Certificate scheme 21
  22. 22. Thank you! www.facebook.com/FIREenergy.manager www.linkedin.com/company/fire-federazione- italiana-per-l'uso-razionale-dell'energia www.twitter.com/FIRE_ita For more information about our activities visit our web site! www.dariodisanto.com

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