The Promotion of Renewable Energies in Italy Mario

The Promotion of Renewable Energies in Italy Mario Lionetti Italian Ministry for the Environment Land Sea Budapest, November 29 th, 2007 Renewable Energies – Scientific Research and cooperation on renewable energy sources between Italy and Hungary

Drivers for Renewable Energy promotion European Union Targets for Electricity from Renewables (EU Directive 2001/77/CE) Targets for electricity from renewables up to 2010

Drivers for Renewable Energy promotion NEW TARGETS in the European Union by 2020 ü a binding target of a 20 % share of renewable energies in overall EU energy consumption by 2020; ü a 10 % binding minimum target to be achieved by all Member States for the share of biofuels in overall EU transport petrol and diesel consumption by 2020; ü increase energy efficiency in the EU so as to achieve the objective of saving 20 % of the EU's energy consumption compared to projections for 2020, ü achieve at least a 20 % reduction of greenhouse gas emissions by 2020 compared to 1990.

Drivers for Renewable Energy promotion Kyoto Protocol

REs Electricity production in Italy – 1997 -2006 Buiomass Hydro Geothermal Wind and wastes Solar 6. 745 2. 971 5. 527 36. 994 * Temporary data

REs Policy Instruments

Incentive mechanism ü Tradable renewable Certificates) energy certificates ü Feed-in tariff (photovoltaic only) Capital cost incentives mainly existing at local level (Green

Green Certificates Mechanism (GC) How does the GC mechanism work ü Producers and importers of electricity from fossil fuels sources are obligated to feed in the electric grid a minimum quota (%) of electricity from renewable energy sources. This quota is a percentage (now 3, 05%) of the total non-renewable electricity produced or imported every year before; ü Renewable electricity production is certified by Green Certificate (GC). Every GC actually has a size of 50 MWh, and is valid for 12 years. ü Producers and importers can fulfil the obligation through the issuing of own green certificates (generated from own renewable energy plants) or buying GC from other operators.

Green Certificates Mechanism (GC) Green Certificates is a market-based mechanism ü Demand of GC: generated from the quota-obligation to electricity producers and importers to feed electricity from RES compared to their production from conventional (fossil) fuels ü Offer of GC: is represented of the GC generated from RES plants (new plants operating from 1 st April 1999 and qualified from GSE) and GC emitted from GSE itself due to the CIP 6 electricity production (only from RES). GSE - Gestoredei Servizi Elettriciis the Agency that manages technicalities related to the promotion and development of renewable energy sources in Italy, accordingly with the Law Decrees regulations.

Green Certificates Mechanism – Demand calculation 22, 9 TWh 11, 5 TWh 194, 7 TWh 183, 3 TWh GC demand in 2004 (2%): 3, 9 TWh ~78, 000 GC Example - 2004 calculation Conventional thermal prod. 2003 (without cogeneration) Non renewable Import 2003 Threshold 100 GWh Base 2003 for calculating obligation

Green Certificates Mechanism – Quota increase Law Decree 387/2003 increases quota obligation of 0, 35% for each year in the period 2004 -2006 + 0, 35% (2, 7%) 5, 9 TWh (2, 35%) 4, 3 TWh (3, 05%) 5, 6 TWh* (2%) 3, 9 TWh 2004 * Provisional data 2005 2006 2007

Green Certificates Mechanism (GC) Subject with RE quota obligation Green Certificates (GC) Market GME Bilateral contract Market €/GC MWh RE Producers Grid €/MWh GME - Gestoredel Mercato. Elettrico

Green Certificates Mechanism (GC) Green Certificates Issued in favour of REs generators after RE plants’ qualification (IAFR) Green Certificates can be sold or purchased in two different ways: Ø through bilateral contracts Ø through GME (Gestore Mercato Elettrico) trading platform

Green Certificates Mechanism (GC) Bilateral Contracts ü Green Certificates can be exchanged through bilateral contracts, between the owners of GCs and obliged producers and importers ü Transactions are carried out by GSE, after receiving two compatible selling/buying requests from the seller and the buyer ü Selling/buying requests are entered via web in a protected area of GSE web site.

Green Certificates Mechanism (GC) GME trading platform ü GME has arranged the GCs trading platform, according to Ministry Decree 11/11/1999 ü Market participants can accede to GCs trading platform through GME web-site, where to enter their own purchase and sale proposal GME - Gestoredel Mercato. Elettrico

Green Certificates Mechanism – Reference Price GSE sells its Green Certificates at a reference price calculated as the ü difference between: ü Average cost of the electricity purchased by GSE from CIP 6 plants (renewable energy plants only) – 197, 21 €/MWh in 2007 ü Average revenue of CIP 6 electricity sold by GSE to the market – 59, 72 €/MWh in 2007 Reference price for year 2007 equals to: 137, 49 €/MWh excluding VAT

Green Certificates Mechanism – Guarantee of Origin (GO) GO has been introduced bu the EU Directive 2001/77/CE with the aim at promoting the exchange of “green electricity” among Member States and in order to increase the level of transparency so for consumers GO is not a direct incentive, but in Countries adopting GC scheme, such as Italy, electricity with GO allows importers to be exempted from the minimum quota obligation In Italy, GSE (Gestore dei Servizi Elettrici) set up a specific procedure for the issuing of the GO to producers Under the Italian legislation, Green Certificates can be also released to electricity importation (with GO) from Countries (also not Member States) that: • have supporting mechanisms similar to the Italian mechanism and • recognize the same possibility to power plants located in Italy (reciprocity)

Feed-in Tariff for Photovoltaic Electricity produced from photovoltaic plants connected to the national grid is boosted through a feed-in tariff scheme. The new Ministerial Decree 19/02/2007 - Tariffs Tariff valid for 20 years (decreasing of 2%/year in 2009 and 2010)

Feed-in Tariff for Photovoltaic - Integration Partial integration Not integrated – on the ground Full integrated

Feed-in Tariff for Photovoltaic PV modules Inverter Counter of the total PV electricity produced Counter of PV electricity released to the grid Counter of PV electricity taken from the grid Two options - Sale the electricity to the grid - Net metering (<= 20 k. Wp)

Feed-in Tariff for Photovoltaic Tariffs increase of 5% when: The subject is a school or a public sanitary centre When the PV plant substitutes asbestos roofs When the subject is a Municipality with less than 5000 inhabitants When the subject is a self-producer (more than 70% of PV produced electricity is directly consumed)

Feed-in Tariff for Photovoltaic – Link with energy efficiency Premium for efficient use of energy Possible for PV plants with capacity ≤ 20 k. Wp operating in net metering The premium (tariff increase) is recognized when , after the realization of the PV plant, energy efficiency interventions are implemented to achieve an energy performance index reduction of at least the 10% The premium (tariff increase) is equivalent to the half of the % of the energy performance index reduction (max. 30%) For new buildings (respecting the EU Directive) the 30% is assigned if the energy performance index is reduced of at least 50% according to a baseline defined in specific decrees Validation of energy savings through the Energy Certification of the Buildings to be set up before and after the energy efficiency interventions Energy Certification of the Buildings contains energy consumes and the list of interventions required for energy savings

Feed-in Tariff for Photovoltaic – Achieved results Results at November 2007 (~ 2 years of implementation) Number of PV installations – Capacity – ~ 53, 500 k. Wp Before feed-in tariff (2005) - ~ 34, 000 k. Wp ~ 5, 500

Renewable Energies – Promoting heating Tax deduction amounting to the 55% of the total cost of the intervention: - promotion of energy efficiency in buildings including solar heating New legislation foresees that at least the 50% of hot water need in buildings is supplied through RE sources: - promotion of solar heating, thermal biomass, etc. White certificates for interventions that reduce primary energy consumption in end-use: - promotion of solar heating and other RE technologies VAT at 10% for REs equipments (instead of 20%)

Renewable Energies – Other measures Priority in dispatching RE electricity into the grid Simplified authorization procedures for RE plants Particular attention to small-auto-producers Simplified procedures for RE plants interconnections to the grid

Renewable Energies – Future perspectives Make “Green Certificate mechanism” more flexible in meeting the specific requirements of each different RE source Possibility to extend “Feed-in Tariff” for small capacity plants Work to make even more effective the simplification of authorization procedures for RE plants