The development of renewable energies in italy results of ten years of experience

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The development of renewable energies in Italy: results of ten years of experience - Gerardo Montanino, Operations Department Head GSE

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The development of renewable energies in italy results of ten years of experience

  1. 1. Gerardo MontaninoOperations Department Head“IRENA meets the Italian Renewable Energy System”GSE – Roma – June 7, 2013The development of renewable energies in Italy:results of ten years of experience
  2. 2. - 2 -Ownership 100%MEFMinistry ofEconomy and FinanceMISSIONGSE promotes the development of renewable energy sources and energy efficiency in Italy,mainly by granting economic incentives and supporting the policy makers.GSE is also involved in various international activities such as, for example,international RES related associations (IRENA, IEA, OME, AIB, RES4MED)or projects funded by the European Commission (CA-RES, PV Parity, etc.).MSEMinistry of Economic Developmentalso in consultation withMinistry of EnvironmentAEEGEnergy RegulatorDecisionsGuidelinesGSE – the Energy Services Operator
  3. 3. - 3 -1) 2020 European targets for renewable energy sources2) Italian instruments to achieve the targets3) Monitoring: the main Italian results- where we are and where we should be- focus on RES-E sector: some thoughts for a cost-benefit analysis4) The National Energy Strategy: new Italian targetsINDEX
  4. 4. - 4 -2009/28/EC Directive2010 Italian RenewableEnergy Action Plan (NREAP)10% 10%26,6%17,1%10,1%17%20% 17%RES in the ELECTRICITY sectorRES in the HEATING sectorRES in the TRANSPORT sectorTOTAL final energy consumptionfrom RESEuropeanTargetsItalian BindingTargetsNREAPs Italian Targets2020 Renewable Energy Sources (RES) TARGETSTARGETS
  5. 5. - 5 -1) 2020 European targets for renewable energy sources2) Italian instruments to achieve the targets3) Monitoring: the main Italian results- where we are and where we should be- focus on RES-E sector: some thoughts for a cost-benefit analysis4) The National Energy Strategy: new Italian targetsINDEX
  6. 6. - 6 -RES - HRES - TSupport schemes Other measuresRES - E• Blending obligation• Grants: “Heating Account”• White Certificates• Fiscal Incentives• Green Certificates (phasing out)• Feed in tariff• Feed in premiumRES sectors• Simplifiedadministrativeprocedures• Technical Regulation• Grids• Training andinformation• Monitoring,controlling andreportingINSTRUMENTSMost instruments were in force already before the Directive 28 (after that they have been updated, butItaly has a long history in focusing on renewables sources)All support schemes except fiscal incentives are managed by GSE
  7. 7. - 7 -RES - E SUPPORT MECHANISMSPV PLANTS OTHER RES PLANTSFeed-in TariffSliding Feed-inPremiumA fixed tariff(technology and sizebanding incentive)PLUSany applicablepremiumValue of Feed-inMINUShourly zonal energymarket pricePLUSany applicablepremiumP ≤ 1MW P > 1MWFeed-in tariffSliding Feed-inPremiumA fixed tariff(depending ontechnology and size)PLUSself consumptionpremium or/and anyapplicable premiumValue of Feed-inMINUShourly zonal energymarket pricePLUSself consumptionpremium or/and anyapplicable premiumP ≤ 1MW P > 1MWYearly cumulative spending limit:6,7 € blnDirectly RegistriesPV plants ≤ 12 kW(≤ 20 kW with 20% tariffreduction)PV plants > 12 kWHow to access to incentives How to access to incentivesDirectly Registries AuctionsVery smallplant & othermarginal cases- RES ≤ 5MWexcept- Hydro ≤10 MW- Geo ≤ 20 MW- RES > 5MWexcept- Hydro > 10 MW- Geo > 20 MWYearly cumulative spending limit:5,8 € blnINSTRUMENTS: RES-E support schemes
  8. 8. - 8 -SUPPORT MECHANISMS FOR RES-E IN EUROPEExamples of comparison of incentives in force in May 2013(20 years annualized total revenues)Feed in tariff Green Certificates Feed in Premium Wholesale electricity price Min and max value of the incentive050100150200250RO CK IT NL UK DE FR SE DK AT€/MWhHydro – 10 MW050100150RO IT NL CK UK DE AT FR DK SE€/MWhWind – 10 MW050100150200250300350DE FR RO UK IT CK NL AT SE DK€/MWhGeothermal – 10 MW050100150200250IT RO AT DE CK UK FR NL DK SE€/MWhSolid biomass – 10 MWINSTRUMENTS: RES-E support schemesFor almost all kinds of small plants, in Italy, incentives given to producers are still the highest of the EU.(this is due to a clear intention, in the latest reform, to encourage specific applications with more impact onItalian supply chain)Source: GSE
  9. 9. - 9 -0100200300400500600700€/MWh0100200300400500600700€/MWh0100020003000400050006000700080009000100002007 2008 2009 2010 2011* 2012 2013MW0100020003000400050006000700080009000100002007 2008 2009 2010 2011 2012 2013MWITALYGERMANY3 kW residential buildingstotal revenues200 kW industrial buildingstotal revenues2000 kW groundtotal revenues* This includes more than 3700 MW of plants already completed in 2010 (“Salva Alcoa” Decree)INSTRUMENTS: RES-E support schemesannual installed MWSUPPORT MECHANISMS FOR PHOTOVOLTAIC IN EUROPEExamples of comparison of PV annual installed capacity and incentives digression(20 years annualized total revenues based on the Italian load factor)Source: GSE
  10. 10. - 10 -010020030040050060070020082009201020111°sem20112°sem20121°sem20122°sem20082009201020111°sem20112°sem20121°sem20122°sem20082009201020111°sem20112°sem20121°sem20122°sem20082009201020111°sem20112°sem20121°sem20122°sem20082009201020111°sem20112°sem20121°sem20122°sem1-3 kW on building 3-20 kW on building 20-200 kW on building 200 - 1000kW on theground>1000 kW on theground[€/MWh]INSTRUMENTS: RES-E support schemesAVERAGE EVOLUTION OF TOTAL REVENUES AND LEVELIZED COST OF ELECTRICITY (LCOE) FOR PV PLANTS IN ITALY(Hyp: 1.250 kWh/kWp; 5% WACC (Weighted average cost of capital); 20 years lifetime; 30% selfconsumption;)• "Parallel" (not simultaneous) decrease of incentives and costs (which is the cause and which is the effect?), not onlyin Italy, but in all EU MS. Decreasing trend of profitability.• LCOE is highly sensitive to the cost of capital (WACC): e.g. in the range 2-8%, a 2% increase in the WACC causes anincrease of 12-14% of the LCOE. Finance costs are high in Italy. In Germany, for example, there is a lower cost ofcapital (moreover, KfW, German government-owned development bank, provides low-interests loans)Total revenue (incentive + max. energy value)LCOESource: GSE
  11. 11. - 11 -RES – H AND ENERGY EFFICIENCY SUPPORT MECHANISMSGrantHeating AccountIncentives are intended tosupport part of investmentcosts through yearlyinstallmentsand are granted for a periodvarying between 1 and 5years, depending on the typeof intervention realized.Quota – obligation schemeWhite certificatesWhite certificates are tradableinstruments giving proof of theachievement of end-use energysavings through energyefficiency improvementinitiatives and projects. It isbased on the obligation forelectricity and natural-gasdistributors to achieve yearlyquantitative primary-energysaving targets.Fiscal IncentivesTax detractionGovernment provides a taxdetraction (raised from 50%to 65% for 2013) of theexpenses for interventions ofenergy re-qualification onexisting buildings, includingthe replacement of oldheating systems with newRES heating devices.Yearly cumulative spendinglimit: 900 € mlnINSTRUMENTS: RES-H (and EE) support schemes
  12. 12. - 12 -RES – T SUPPORT MECHANISMSQuota-obligation schemeBiofuel certificatesIn Italy gasoline and diesel distribution companies are obliged to blendfossil fuels with a quota of biofuels (blending obligation).The companies can fulfill their obligation also by acquiring theequivalent quota of certificates. Every certificate corresponds to a wellestablished biofuel quantity, that differs according to the biofuelstypology blended (i.e: first or second generation biofuels).All the biofuels consumed in Italy must comply with well definedEuropean sustainability criteria.INSTRUMENTS: RES-T support schemes
  13. 13. - 13 -1) 2020 European targets for renewable energy sources2) Italian instruments to achieve the targets3) Monitoring: the main Italian results- where we are and where we should be- focus on RES-E sector: some thoughts for a cost-benefit analysis4) The National Energy Strategy: new Italian targetsINDEX
  14. 14. - 14 -MONITORING“SIMERI”RES incentivesresultsEU SupportSchemesCostsGreen economyAvoidedemissionsAuthorizationsAnnual ReportProgressReportThe legislation includes a number of monitoring tasks (assigned to GSE)RES STATISTICAL MONITORING to verify the compliance with the national and regionaltargets (burden sharing).Reports on RES SUPPORT RESULTS: Green Certificates, Feed in Tariffs, Conto Energia,Heating Account, Biofuels, etc.International energy policies: reports on ANALYSIS AND COMPARISON OF RES SUPPORTSCHEMES among EU MS; report on sustainability certification systems for biofuels.Report on GENERATION COSTS in the main European Countries, with a special focus onItalyReport on the assessment of the ECONOMIC AND EMPLOYMENT IMPACTS of renewableenergy and energy efficiency development in ItalyAssessment of the ENVIRONMENTAL IMPACTS of RES and EE development (first of allavoided emissions)Report on the AUTHORIZATION PROCEDURES of renewable energy power plants inItalian RegionsANNUAL REPORT ON RES DEVELOPMENT IN ITALY: results, targets, costs, scenarios,forecastsBIANNUAL REPORT FOR THE EUROPEAN COMMISSION on the progress in thepromotion and use of energy from renewable sources (2009/28/EC Directive)
  15. 15. - 15 -Progress ReportLegislative Decree no. 28/2011 charges GSE to draft the << Report on progress made by Italy inthe promotion and use from renewable sources >>. This report is made every two years, withreference to the previous two years, and sent to the European Commission.ProgressReport1° Progress Report.The first biannual report was made and sent to theEuropean Commission in 2011.2° Progress Report.2° report, to be sent by 2013, is under preparation.Many information required:• statistical data on RES-E, RSE-H, RES-T;• authorization procedures;• development of networks;• incentives in the electricity, heat and transport:explanation, results, effectiveness and efficiency;• allocation of costs;• emissions avoided and other environmental benefits;• impacts on biodiversity and other environmentalimpacts;• guarantees of origin;• availability of biomass;• impact of the development of renewable energy on theintended use of the land and on agricultural prices;• development of 2nd generation biofuels;• update on estimated production and consumption ofenergy in all sectors until 2020;• international cooperation projects.MONITORINGFinal consumption from RES
  16. 16. - 16 -1) 2020 European targets for renewable energy sources2) Italian instruments to achieve the targets3) Monitoring: the main Italian results- where we are and where we should be- focus on RES-E sector: some thoughts for a cost-benefit analysis4) The National Energy Strategy: new Italian targetsINDEX
  17. 17. - 17 -2011 Statistical Data(latest available data in terms of total final consumption)ENERGY PRODUCTION FROM RES IN THE ELECTRICITY SECTOR 2011 ENERGY CONSUMPTION FROM RES IN THE HEATING SECTOR 20116,9%12,6%13,2%13,3%54,0%GeothermalWindSolarBioenergiesHydro2,1%2,3%11,4%22,0%62,2%GeothermalSolar thermalDerived heatHeat pumpsBioenergiesMONITORING: where we are
  18. 18. - 18 -2005-2011 trends and 2020 binding targetsMONITORING: where we are and where we should beData available on SIMERI (http://www.gse.it/it/Statistiche/Simeri)Share of RES in TOTAL gross final consumptionShare of RES in gross final consumption in the TRANSPORT sectorNREAPs trajectoryFinalNREAPs trajectoryFinal
  19. 19. - 19 -2005-2011 trends and 2020 NREAP sectorial targetsMONITORING: where we are and where we should beData available on SIMERI (http://www.gse.it/it/Statistiche/Simeri)Share of RES in gross final consumption in the ELECTRICITY sectorShare of RES in gross final consumption in the HEATING sectorNREAPs trajectoryFinalNREAPs trajectoryFinal
  20. 20. - 20 -1) 2020 European targets for renewable energy sources2) Italian instruments to achieve the targets3) Monitoring: the main Italian results- where we are and where we should be- focus on RES-E sector: some thoughts for a cost-benefit analysis4) The National Energy Strategy: new Italian targetsINDEX
  21. 21. - 21 -MONITORING: FOCUS ON ELECTRICITY SECTORBreakdown of electricity demand in Italy (TWh)From 2002 to 2012:- renewables have increased significantly, especially in recent years- the balance of trade decreased slightly from 40 to 51 TWh- conventional production has fallen (from 213 TWh in 2002 to about 193 TWh in 2012).* Preliminary Data . Source TERNA/GSE - ** “Other fossil fuels” includes pumping hydro plants, derivative gas ,etc.Balance of tradeNatural GasRenewablesCoalOil productsConventionalOther fossil fuels **
  22. 22. - 22 -MONITORING: FOCUS ON RES-E SECTORRES cumulative installed capacity RES gross electricity productionHuge growth of photovoltaic power in a few years, continued good growth of wind power (both non-programmable)Recently, remarkable growth of small biogas plants
  23. 23. - 23 -Indicative cumulative yearly cost of RES-E support(“counter PV” and “counter others RES”)Estimate of the net potential annual cost, already committedbut not yet fully supported. It includes the economic value ofall green certificates as well the costs of registries and auction.It does not include the costs of services such as “simplifiedpurchase & resale arrangement” and “net metering”.June 6,2013April 30, 2013(latest available estimate)PV 6,47 € bilOther RES 2,54 € bilFossil 0,87 € bilTotal 9,87 € bilMONITORING: FOCUS ON RES-E SECTOR. COSTSNet cost of incentiveson electricity bills (A3) in the year 2012It includes the costs of services such as “simplified purchase &resale arrangement” and “net metering” (0,2 € bil).It does not include the economic value of the greencertificates that have not been withdrawn from the GSE.PV 6,70 € bil 6,70 € bilOther RES 4,22 € bil 5,80 € bilTotal 10,92 € bil"Spending caps"Components of the electricity bill for a household type (March 2013):53% energy and dispatching; 17% burden for incentives;15% transmission and distribution; 13% taxes; 2% other system burdens
  24. 24. - 24 -MONITORING: FOCUS ON RES-E SECTOR. ECONOMIC BENEFITSHOURLY PRICES CURVE IN THE WHOLESALE ELECTRICITY MARKET(comparison between Tuesday 23rd May 2006 and Thursday 23rd May 2013)“Peak shaving” in the electricity marketThe price increase during the evening hours is heavily outweighed by thesavings during the solar hours.2013 averagedaily price2013 hourlyzonal price2006 averagedaily price2006 hourlyzonal price
  25. 25. - 25 -MONITORING: ENVIRONMENTAL AND ECONOMIC BENEFITS0.2 Mt2.9 Mt7.4 Mt3.8 Mt0.4 Mt0.3 Mt23.3 Mt4.7 Mt3.8 Mt2.9 Mt1.0 MtBIOETHANOLBIODIESELBIOENERGYHEAT PUMPSSOLARGEOHYDROWINDBIOENERGYGEOPVRES – H(11.9 Mt CO2)RES – T(3.1 Mt CO2)RES – E(35.8 Mt CO2)Avoided emissions of CO2 equivalent in 2010 *Methodology: Life Cycle Assessment + individuation of fossil energy technologies replaced (in the electricity sector each renewabletechnology is assumed to replace the share of energy production from fossil sources that was marginal in the period of production).* 2010 is at the moment the last year for which the methodology has been applied. 2011 and 2012 are currently being evaluated.Source: GSE
  26. 26. - 26 -MONITORING: FOCUS ON RES-E SECTOR. ECONOMIC BENEFITSEmployment impacts due to investments in 2011RES Investments in 2011Impacts on national value added in 2011Impact on gross domestic production in 2011Source: GSEMethodology: input/output analysis, using spending vectors updated and corrected to take account of the value of imports and exports
  27. 27. - 27 -PVHuge imports of PV cells and modules. National inverter manufacturers are wellpositioned in the national and international marketCSPStrong competences in some aspects.Delays in projects development.Solar thermal Domestic manufacturers are well positioned in the overall sectorHydro Several Italian main contractors are leaders in the international marketWindHuge imports of wind turbines.Foreign companies are leaders in the equipment manufacturing.GeothermalOne of the main Italian electricity operators is a global leader in geothermaltechnology.Bioenergy(electricity sector)For certain technologies there are Italian manufacturers that’s can provideequipment and EPC services.Bioenergy(heating sector)Domestic manufacturers are well positioned in the overall sector.Bioenergy(transport sector)Recently, a new initiative is carried out by an Italian company concerning thedevelopment of 2° generation biofuelsMONITORING: ITALIAN INDUSTRYAverage situation of the Italian industry in RES technologies.Sketch to be taken lightly.
  28. 28. - 28 -1) 2020 European targets for renewable energy sources2) Italian instruments to achieve the targets3) Monitoring: the main Italian results- where we are and where we should be- focus on RES-E sector: some thoughts for a cost-benefit analysis4) The National Energy Strategy: new Italian targetsINDEX
  29. 29. - 29 -Four main goals1) Significantly reduce the energy cost gap for consumers and businesses, by bringing prices andcosts in line with European levels2) Achieve and exceed the environmental targets established by the European Union’s 2020Climate and Energy Package (known as the “20-20-20” package)3) Continue to improve our security of supply, especially in the gas sector, and reduce dependencyon imports4) Foster sustainable economic growth by developing the energy sectorSeven priorities of action1) Foster energy efficiency2) Promote a competitive gas market3) Sustainable development of renewable energies4) Development of infrastructure and electricity market5) Restructure the refining industry and the fuel distribution network6) Sustainably raise national hydrocarbons production7) Modernize the system of governanceNATIONAL ENERGY STRATEGY
  30. 30. - 30 -NATIONAL ENERGY STRATEGY: NEW TARGETSNational Renewable Energy Action Plan (NREAP) vs National Energy Strategy (NES)RES – ERES contributionto the electricity targetRES - HRES contributionto the thermal targetRES - TRES contributionto the transport target~6 Mtoe~ 10,5 Mtoe~ 11 Mtoe26%36%-38%17%19%-20%10 %10 %~ 8,5 Mtoe(~ 100 TWh )~ 11 Mtoe(~ 130 TWh )11% ~ 1,4 Mtoe~ 3,4 Mtoe~ 3,4 Mtoe10%5%~ 8 Mtoe(~ 92 TWh )28%2012 2020 NREAP 2020 NES 2011 2020 NREAP 2020 NES 2011 2020 NREAP 2020 NES20112020 NREAP2020 NES 126 Mtoe133 Mtoe126,2 MtoeGross finalenergyconsumption
  31. 31. - 31 -Thank you for your attention

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