This 3-page document discusses objectives and plans for Italy's energy sector to meet 2020 targets for renewable energy generation, emission reduction, and energy efficiency. It outlines Italy's targets of achieving 20% renewable energy generation, a 20% reduction in emissions, and 20% improved energy efficiency by 2020 based on EU directives. Potential levers are identified such as incentives for renewable sources, carbon capture and storage, and initiatives to improve building and industrial efficiency. Projected generation mixes for Italy and the EU in 2020 are presented, indicating an expected increase in renewable sources like solar and wind power. Open discussion points are posed around interventions needed in the generation mix, grid infrastructure improvements, and appropriate incentive systems.

1. ITA-SOLne-090928-P0
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Milan, 28 September 2009

2. ITA-SOLne-090928-P1
Finance &
Objectives Plan Authorize
realize
• Definition of long- • Assessment of • Screening/ • Financing of
term objectives possible areas of approval of approved projects
for the Country, intervention and projects -Project finance
e.g.: priorities setting: -Approval at schemes
-System security -New generation national/local level -Special Purpose
-Energy costs capacity (Title V devolution) Vehicles
-Share of -Improvement of -“Conferenza dei -Infrastructural
renewable system efficiency servizi” Funds
generation (existing plants, -VIA/VAS
-Emission reduction interconnectors,…) procedures • Realization of
-Consumption -Improvement of -Regional projects
reduction (“energy energy efficiency Administrative -Build
efficiency”) • Definition of Court rulings -Start-up
-… incentive/ penalty (TAR) -Operate &
schemes Transfer
Focus of EU Directive • Definition of
(20-20-20) national/regional
energy plans
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3. ITA-SOLne-090928-P2
Italy targets at 2020
20% renewable generation 20% emission reduction 20% energy efficiency
Today • 5% of 340 TWh • ~600 Mio tons CO2/y • Italy today: ~170 Mio TEP
2020 • 17% of 470 TWh • -20% to reach ~500 Mio • -20%: -34 Mio TEP
(European target tons/y
20%)
• -13% for sectors not
covered by EU Emission
Trading Scheme (ETS)
Possible • Incentives to • Zero emission • Building efficiency
Levers renewable sources: generation: nuclear? certificates
. Solar
. Wind • CCS: Carbon Capture & • Process efficiency
. Biomass Storage
.… • Co/ Tri generation
• New transport
technologies (new modal •…
transport, hybrid cars,
mass transport, …)
Source: GSE, 2007 Energy Report, AEEG, Bocconi IEFE, RIE Bologna, Value Partners Estimates
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4. ITA-SOLne-090928-P3
!
FOR DISCUSSION
1 • Which are the interventions on the generation mix required to
balance cost/environmental objectives?
2 • Which interventions on infrastructures (particularly on the grid)
are needed to optimize system efficiency in the new scenario?
3 • Which types of incentive systems are more appropriate to
promote the evolution towards the desired scenario?
4 • Which initiatives should be taken to ensure that incentives
contribute to the development of national industries?
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5. ITA-SOLne-090928-P4
"
! 1
ESTIMATES
Hydro + renewables
Nuclear
Fossil fuels
Generation mix Italy vs. EU27, Possible future developments
Percentage of production
• Further push on renewables (in
Renewables* 5% 5% progress)
12%
Hydro 13% 9%
12% • Increase of gas supply through
Oil 13% the introduction of new LNG
7% 30% terminals
Coal 14% 14%
4% • Selective introduction of nuclear
plants?
31% • Further development of “clean
Gas coal”?
55% 55%
Italian CCGT
efficiency higher • Increase of electricity imports
than OECD avg. 21%
from neighbouring countries
(51% vs. 45%) through new interconnections?
Italy, 2007 Italy, 2020 EU27, 2007
(projected) •…
* Wind, solar, bio-mass, waste,…
Source: SAFE, Value Partners analysis
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6. ITA-SOLne-090928-P5
2
Removal of internal Increase of international Development of
bottlenecks connections “Smart Grids”
Critical
sections
• Congestions among different • Strong price differentials • Change of paradigm: from few
areas do not allow the most between Italy and neighbouring large-size plants to distributed
efficient plants to operate and countries (France, Austria, generation
result in price differentials CEE, …) but international links • Development of domestic
• South and Islands are generally still limited systems (solar, micro-
disadvantaged • June 2008: new UCTE plan turbines,…) which need to
• Congestions bound to increase envisions several new lines with exchange energy with the grid in
with new plants if no measures France, Switzerland, Austria, both directions
taken Slovenia, Croatia and Tunisia
Source: SAFE; UCTE; Value Partners analysis
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7. ITA-SOLne-090928-P6
#
! 3
Billion Euros
Estimated Estimated cost
Possible areas Examples incentives to reach 2020
of intervention 2000-2010 (total) targets
Need to re-balance
• Conto Energia the incentive
New (80 Mln € in ‘08) schemes:
• CIP6
generation ~30 ~60
(~5 Bln € in ’07) . Carry on the effort
capacity • Green certificates on generation,
• Tax exemptions focusing it on
• Trans EU networks “real” renewables
Improvement • Green book on
interconnections ~2 . Invest in network
of system ~40
•… efficiency and
efficiency security of supply
. Strongly promote
• White certificates energy efficiency
Improvement market on end users and
of energy • 55% tax reduction ~5 ~100 not only on
efficiency on energy saving distributors
investments
•…
Source:GSE, 2007 Energy Report, AEEG, Bocconi IEFE, RIE Bologna, Value Partners Estimates
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8. ITA-SOLne-090928-P7
$% & 4
'
MW Old incentive schemes
Thanks to "Conto Energia"
“Conto Energia” New "Conto Energia"
• Feed-in tariff to re- Existing photovoltaic plants Expected evolution
launch development
of photovoltaic ~2.000
generation
introduced in July
2005 ~1.400
• The tariff rewards
production, is granted
for 20 years and is ~800
about 0,4 €/kWh
~500
produced with a 2%
~300
reduction per year
~40
~120
~40 ~50 ~40 ~260
~30 ~32
• Rates increase with ~40
~10 ~80
2009E 2010E 2011E 2012E
level of architectural 2003 2004 2005 2006 2007 2008
integration and varies
In 2011 the 1.200 MW, cap of the existing
with power installed "Conto Energia“ will be reached
Source: Politecnico di Milano, Solar Energy Report 2008; Value Partners analysis
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9. ITA-SOLne-090928-P8
' !
4
EXAMPLE: PHOTOVOLTAIC
Italian companies Italian companies
Foreign companies
Foreign companies
with subsidiary in Italy
% on total
50-60% 30% 10%
investments
Components/
Silicon & Cells &
control EPC/
Wafer Modules Installers
systems Distributors
producers producers
producers
Presence of 2%
23% 26%
Italian 40% 38%
52%
companies 25% 74%
98% 22%
Typical
~50% ~18% ~15% ~10% ~20%
EBITDA
Source: Politecnico di Milano, Solar Energy Report 2008, Press clippings
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10. ITA-SOLne-090928-P9
Initiatives taken so far Open issues Further improvements needed
• “Autorizzazione Unica” • Different implementation by Regions • Implement homogeneously in all
• Often an “on-top” procedure Regions making it really the
• +20-25% extra costs and +10-15% “only” authorization needed
extra time with respect to EU
standards
• “Conferenza dei servizi” • Authorization doesn’t mean • Sanctions to plaintiffs in case of
realization (minorities can rely on unjustified/ unproven legal
TAR and State Counsel suspension) actions
• Regional Energy Plans • Different application by Regions • Create PEAR in all the regions,
(PEAR) using the same guidelines
• VIA procedure for larger • Lack of national guidelines • Create a “VIA - Autorizzazione
plants Unica” valid for all plants
• DIA procedure for smaller • Separate procedures for plant and • Parallel procedure for plant +
plants in some Regions feed-in-point connection (especially connection
if expropriation is needed)
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11. ITA-SOLne-090928-P10
Italian context
• Public institutions and private investors Implications on funding of energy
with limited experience in infrastructural projects
investments
• The Italian context “as-is” is not able
to mobilize the size of investments
• Limited use of “innovative” financial
which is needed to support the
instruments (e.g. bonds for financial
evolution of the system
investors, asset backed securities)
• As a result, many projects already
• Credit market crunch increasing
approved/ ”quasi approved” fail to
caution from lenders and investors
start because of lack of capitals
• Institutional investors interested mostly
• To fill the infrastructural gap, Italy
in “brown field” equity investments
needs a strong evolution in terms of
financial culture of the institutions
• Complexity, uncertainty of times and
operating in the market
unclear authorization procedures
strongly influence investors’ interest
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12. ITA-SOLne-090928-P11
$( & ) FOR DISCUSSION
Finance &
Objectives Plan Authorize
realize
• System security • New energy plan: • More agile • Extension of new
• Energy cost reduction -Nuclear authorization project financing
• Renewable energy -Renewables procedures for schemes
• Emission reduction generation and grid -SPV involving utilities
• Energy efficiency • New infrastructure connection -SPV promoted by
plan: financial companies
-Energy corridors • Improved cooperation -Securitization
-Gas hubs between central and schemes to create
-Smart grids local authorities new financial
-Reduction of local veto products
• New incentive power, particularly for
• Optimal resource schemes strategic investments • Involvement of other
allocation -Renewables -Introduction of local financial subjects:
• National industry -System efficiency benefits linked to -PE funds
creation -Energy efficiency investment realization -Infrastructural funds
• R&D -“Fondazioni”
• New industrial policy • Central monitoring of -…
-Promotion of R&D on project
new technologies implementation times
-Promotion of national and analysis of critical
industrial chains cases
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13. ITA-SOLne-090928-P12
%
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