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Italy

 

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Current Situation
Historically Italy has had a large share of renewables from hydropower but most energy growth in the last 30 years has come from fossil fuels. Now Italy is trying to catch up with other renewables such as wind power, solar and biomass.

Italian RES-E policy is an integrated part of CO2 reduction policies. In 2001 the main support programme CIP6 was replaced by a green certificate system with obligatory RES-E targets for producers and importers of electricity.

The initial requirement for 2001 was set at 2% of the electricity provided or imported and the requirement is being gradually increased over time. RES-E targets increased by 0.35% per year until 2006. Starting from the 2007 the RES-E target will increase annually by 0.75% up until 2012. The Italian government will decide upon a new annual increase percentage staring from 2012.

The initial overall target of 2% of the certificate system was not reached in the first full year of operation (2001) and over the past years the market has always been short, although the tendency is that this shortage is decreasing.

Additional support mechanisms have been introduced more recently to supplement support for a variety of other RE technologies. Additional support mechanisms have been introduced more recently to supplement support for a variety of other RE technologies. GSE, the former GRTN as the Italian Power Services Administrator, may sell certificates produced at eligible RES-E plants from the former CIP6 support scheme at a fixed price only if the market is short, to prevent prices being too high in the market.

The 2008 budget law introduced new provisions for renewable powers producers. Effects on the markets are expected. In general the new provisions appear to be more generous for renewable power generators. Moreover some changes are proposed to favour especially small generators. However, some uncertainty about the effects of the new provision still remain considering that the new provisions still need to be implemented through the adoption of ministerial decrees.

Hydro power provided the largest share of RES-E production in Italy in 2005, with a total generation of about 46 TWh, including both large and small-scale hydropower stations.

Geothermal electricity is the second most important RES-E source, representing about 15% of RES-E production. Worth mentioning is also the strong growth of the installed wind power capacity, with a growth factor of more than 380 in the period from 1990 to 2004, up to 1,125 MWe in 2004. Installed wind capacity stood at 1,717 MW at the end of 2005. Installed PV capacity grew by nearly 700% in the period 1990 to 2003, reaching an installed capacity of 36 MWp (of which 23 MWp was grid-connected) at the end of 2005. As a percentage of total electricity consumption the share of RES-E in Italy decreased from 16% in 1997 to 14% in 2005.

Penetration of biomass heat is high in Italy, contributing 1,893 ktoe in 2005 (not including non-commercial biomass use), down from 2,393 ktoe in 2004. Over the 1997 to 2005 period biomass heat has grown slowly at an average rate of 6% per annum.

Solar thermal heat has been increasing strongly in Italy although there is still further potential for growth, due to the current low penetration. Geothermal heat shows a relatively high penetration in Italy. In 2006 biodiesel consumption was 177 ktoe, which is marginally higher than in 2005. Italy has the second highest biodiesel production capacity in the EU27, after Germany, and the country ranks fourth in terms of biodiesel consumption. Bioethanol production for transport only began in 2006.

Biofuel penetration in Italy has shown significant growth in the 1997 to 2006 period. However, overall biofuel consumption remained relatively constant between 2005 and 2006 as what little bioethanol consumption there was in 2005 ( 5 ktoe) declined to zero in 2006. Correspondingly biodiesel consumption increased by around 5 ktoe between 2005 and 2006.

Perspectives
Despite strong growth in sectors such as onshore wind, biogas and biodiesel, Italy is far from the targets set at both the national and European level. Several factors contribute to this situation. Firstly, there is a large element of uncertainty due to recent political changes and ambiguities in current policy design. Secondly, there are administrative constraints such as complex authorisation procedures at local level. Thirdly, there are financial barriers such as high grid connection costs. In Italy, there is an obligation on electricity generators to produce a certain amount of RES-E. At present, the Italian government is working out the details of more ambitious support mechanisms for the development and use of RES.

Renewables accounted for 6.7mtoe (ton of oil equivalent) in 2005. In order to promote RES-E (Electricity production from renewable energy sources), Italy has adopted the following schemes:
 Priority access to the grid system is granted to electricity from RES and CHP plants.
 An obligation for electricity generators to feed a given proportion of RES-E into the power system. In 2006, the target percentage was 3.05%. In case of non-compliance, sanctions are foreseen, but enforcement in practice is considered difficult because of ambiguities in the legislation.
 Tradable Green Certificates (which are tradable commodities proving that certain electricity is generated using RES) are used to fulfil the RES-E obligation. The price of such a certificate stood at 109 EUR/MWh in 2005.
 A feed-in tariff for PV exists. This is a fixed tariff, guaranteed for 20 years and adjusted annually for inflation.

National legislation is being developed, both for RES-H (Production of heat and cold from renewable energy sources) and for biofuels. Subsidies are already in place for bioethanol production and tax exemptions for biodiesel production.

As yet, no national policy framework exists that supports RES-H. In the meantime, certain regional and local governments have introduced some measures to promote RES. These have taken the form of incentives for solar thermal heating and compulsory installation of solar panels in new or renovated buildings.

The Italian target for renewables according to the EU is 17% (2005=5,2%). The renewables target is calculated as the share of renewable consumption to gross final energy consumption.

Key Players
Totally new organisational structures were set up on the Itali- an energy market in the 1990s, as EU legislation was adding pressure to liberalise the production and distribution of electricity and a strong need for a change in the energy policy was becoming apparent due to latent difficulties in supply. In September 2003 there was a temporary total blackout.

These milestones are difficult to plan because energy policy falls within the competence of seven different Ministries. Until July 2006 the tasks of planning an energy policy were the competence of the Interministerial Committee for Economic Planning (CIPE) and were later passed to the Presidency of the Council of Ministers.

From the organisational point of view, the energy market has been strengthened due to deregulation. However, it has developed relatively slowly compared to other EU countries. It started in 1999 with the “Bersani Decree” which applied the EC Directive No. 92 of 1996 concerning the general common conditions of the European energy market. Gradually, the conditions of competition were deregulated for the production, importation, distribution, sale and purchase of energy. A complete deregulation of the energy market was reached in July 2007.

Thus, the previous monopoly of the ENEL (Ente Nazionale per l’Energia Elettrica; National Electricity Board) and ENI (Ente Nazionale Idrocarburi; National Hydrocarbon Board) State industrial groups on the electricity, gas and oil markets also ended. Initially in 1992 they were transformed into limited companies and then some were partially privatised. Both the - se businesses, each state-owned by more than 30%, are still by far the most important players on the Italian energy market. In addition to these there are other large multinational producers and distributors of electricity and gas such as Endesa, Edison Energia and Edipower, as well as numerous small suppliers of energy, some partially municipal or state-owned.

Above all, in the sector of renewable energy, the GSE (Gestore della Rete di Trasmissione Nazionale; Manager of the National Transmission Network) must be appointed. It is an Italian limited company entirely controlled by the Ministry of the Economy and Finance and concentrates on the promotion and stimulation of the electricity production from renewable sources. Its task is to organise, manage and supply the incentive programmes of these sources. The limited company GME (Gestore del Mercato Elettrico; Manager of the Electric Market) operates as a subsidiary of GSE.

In January 2004 the latter was put in charge of the economic organisation and economic management of the electricity market, the so-called “Energy Exchange”. GME acts according to the principles of neutrality, transparency and objectivity and competition between producers by providing the economic management of an adequate reserve of power.

Job demand
The steady growth of the Italian market has encouraged a number of international turbine manufacturers to expand operations to Italy. There are also several local RES (mostly wind turbine) manufacturers – some of which have specialised in small-scale and off-grid applications – and a combination of local and foreign developers. The former national power company decided to invest in renewable energy installations and some other EU utilities have followed their path. Other sources of employment are linked to the construction and operation of wind farms, as well as engineering, financial and legal services.

A promising market in Italy is the photovoltaic market: In January 2009, the Italian government extended the net-metering (‘Scambio sul posto’) to PV systems up to 200 kW. This means the PV system owner can valorise the electricity he produces himself at the same price as the electricity he consumes traditionally from the grid. If, over a time period, there is an excess of electricity fed into the grid, the PV system owner gets a credit (unlimited in time) for the value of the excess of electricity. This measure is very attractive for the residential, public and commercial sectors. On top of the valorisation of the electricity itself, the PV system owner also gets a premium FiT on the total electricity produced by the PV system. Under the present FiT scheme valid until the end of 2010, EPIA expects continuous growth of the Italian PV market. In the Policy-Driven scenario, EPIA expects the Italian PV market to reach the GW scale by 2011, assuming that the administrative procedures will be harmonised at regional level, that the net-metering will have a strong impact on the demand for PV systems and that the new FiT will have no cap limitation and will remain consistent with the existing one.