Big Opportunities & Big Challenges for the Italian Clean Energy Market
image credit: Etalia Summit, Four Seasons Hotel Milan 3-4 June 2019
- Jul 5, 2019 6:04 pm GMT
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The first edition of the Etalia Summit took place June 3rd and 4th at the fabulous Four Seasons Hotel in the heart of Milan’s fashionable district. Two intense days of high powered debates, presentations, non-stop expresso fuelled networking and a fantastic rooftop party meant for a valuable meeting of both some of the country’s and indeed Europe’s best clean energy experts. Debates ranged far and wide from:
Top 10 Issues
- Methods for PPA risk allocation
- The use of agricultural lands for utility solar & greenfield construction
- The tortuous and lengthy regional permitting processes
- Regulatory reform for the new energy mix
- Financing in the face of solar cannibalisation
- Repowering & revamping wind and solar
- The secondary market of asset aggregation and acquisition
- O&M best practice
- Potential for offshore wind
- EV Charging
The government’s legally binding targets set, a first phase of lower <1GW per annum renewables growth for 5 years (politically convenient) followed by a very high 4.8GW per annum growth for 2026-2030 (next Government’s problem!). The target of 40-45 GW of wind and photovoltaics from now until 2030 is a challenging, complex, but still an achievable goal, however work must start now.
“It was a nice surprise to listen at high level speeches during the event, the overall quality of the panels were really above my expectations” MP, Proxima
The Summit focused on 3 key challenges: Money, Land and Regulation.
There is capital readily available IF the government succeeds in drawing up an investment grade regulatory environment that will provide some certainty for investors that remuneration will be available to offset the dangers of solar/renewable cannibalisation. The targets especially in the latter half of the decade will be tough to meet without this new legislation. There simply is a cost to decarbonisation that needs to be offset by creating a regulatory environment that rewards investors and reduces the risk of matching variable supply to meet the variable demand curve of peaking and seasonal power.
The new environment and reforms to the electricity market should encourage new tools and markets such as a liquid PPA market, ways to mitigate the cannibalism effect of renewables and the creation of market for electricity storage at both a plant level or and/or at aggregation points on the network.
PPA’s supply is not the issue but where are the buyers? Demand needs to increase especially from corporate and industrial sector. There are probably only 10 major C&I players on the european exchange. LightsourceBP have taken a risk they don’t usually do and have a short term PPA’s in place for one of their investments. What will stimulate demand from the corporate sector? Will there be greater impetus for greener products as a result of the Great Thunberg induced climate strikes?
“E-Talia summit gave me the opportunity to get information which we usually lack at the ground investigation consultancy level” JPS, GMS
Money is available for now but the Italian energy market is currently balanced with supply meeting demand. Regulation will need to ensure that there is greater future demand for cleaner electricity. A lot of risk is currently attached with long term PPA terms of 8-10 years that means that for a 30 year asset you need have 2 renewals of the debt finance. Debt will be on 8 years terms as it will match the PPA where previously it used to be fixed for 16 years. However the 6-8% return does not match the interest of investors, it is too long and with too little return.
Italian Energy Mix 2019 – 117GW Installed Capacity
- Thermal 60GW (Coal 8GW Gas 52GW)
- Solar 20GW
- Hydro 22GW
- Wind 10GW
- Geo & Bio 5GW
- Interconnections 12GW
Peak power of 57GW occurs with peak summer heat driven by AC demand and this is an addressable market for solar and wind. If storage is added to solar it can cover the peak efficiently and cost effectively. If coal is to be phased out then there needs to be a driver of either (1) rising carbon prices (2) end user obligation to buy green electricity or Italian carbon tax (3) growth of electric vehicles.
(2) Permitting & Regulation Fragmentation
The Regions and the Provinces can take up to 2 years processing a permission, something that by comparison would take 3 months in other markets, like the UK. This costly delay will hamper all projects, deals and the functioning of the market. In addition different regions have their own level of regulation and complexity for example in the Basilicata region you cannot build 10MW plants, so lots of 9.9MW plants but no one knows why and this is not aligned with the country’s targets.
A plant could even still be challenged by external parties up to 4 years after it actually gets permitted and built, meaning greater risk going forward. Because of the fragmentation and complexity of regulation every plant needs to be a “bespoke tailored suit” and therefore project developers cannot adopt a cost effective “cookie cutter industrial wide approach” and so this adds time and therefore adds cost.
The government has set the ambitious targets but little clear direction on how to achieve these nor a functioning market to attract investment.
A major issue will be the prohibition of developing utility scale solar projects on agricultural land where lots of poorly used land that has been supported by CAP subsidies to produce agricultural products that are not actually wanted. Lots of marginal land exists and only a small percentage of agricultural land need be used.
It doesn’t make sense to have the solar target achieved by a split of 33% utility scale (1MW+) and 66% C&I/Residential (<200kw) systems as the lack of tracking on rooftops means that they will produce the same amount of energy 1800hrs vs 1100 hrs. Italy would get a lot more electricity from a higher percentage of less costly utility scale projects.
“An opportunity to catchup with relevant players and to be updated on the market” FP, Next Energy Capital
Beyond agricultural land, industrial land is a good opportunity but more expensive. In addition projects could take place on quarries (if not too shaded), landfill and polluted lands which should all have better incentives. Everyone wants to play football like kids, and a huge majority of projects are all “crowded around the ball” in Sicily and Puglia. Other good opportunities remain in the North and Central regions like: Lazio, Tuscany, Piemonte and Sardinia for clever developers seeking out good sites located nearer good grid access points.
The Italian wind market which currently ranks 5th in Europe with just over 10 GW currently installed and the new goal of adding 8 GW by 2030 (National Integrated Plan for Climate and Energy 2030 or Piano Nazionale Integrato Energia e Clima in Italian). How much of the new capacity will come from greenfield sites and in which regions? How much will come from repower of the existing wind projects which were mainly installed from 2006-2012?
ERG, who operate about 1 GW of wind in Italy, has officially announced a repowering and re-blading plan for six wind farms whose capacity will be upgraded from 150 MW to 260 MW, resulting in nearly 4-fold (73%) increase in power generation while halving the number of turbines.
“Valuable discussions with different players across the value chain” MP, Uniper
The very valuable two days of interactive panels gave a lot of clarity of what needs to happen next to ensure that the Italian electricity market develops towards 54% renewables. We are already hard at work on developing the Etalia 2020 programme and ensuring an action oriented and outcome focused positive event that makes change happen. Please contact me if you wish to help, offer expertise and all suggestions are welcome.
For Etalia Summit 2020 we will increase the content and coverage of the Congress and also launch a networking exhibition, the Solar Show Italy.
Etalia Summit & Solar Show Italy
April 2020, Milan
Agenda at a Glance
ETalia Leaders Summit Plenary & Opening of Solar Show Italy
Utility Scale Solar
Corporate & Industrial Energy
Financing New Projects Equity
Utility Scale Solar
Onsite Energy Projects
Energy Trading Italy
Gas Peakers & Flexible Power
Clean Asset Management
Solar + Battery
Pumped Hydro Projects
ETalia Summit Plenary & Closing of Solar Show Italy
Audience - High Quality Senior Decision Makers from:
Utilities, Utility Scale Project Developers, Installers, Distributors, Municipalities, Commercial & Industrial Energy Managers & Buyers, Energy Advisors, Architects, Housing Corporations, Agricultural Companies, Real Estate, Property Developers, EPC Contractors, Tourism & Hotel Owners and many many more
700 Attendees * 40+ Exhibitors * 140+ Speakers
If you wish to speak at the 2020 Summit please email me Nadim.Chaudhry@greenpowerglobal.com