Degree of reliance on imported energy:
Italy relies heavily on imports and is the world's largest net importer of electricity. In 2011, 47.5 billion kWh was imported, and only 1.8 billion kWh exported, this net import level being typical of the last decade. Based on total final consumption of about 300 billion kWh in 2011, about 15% of this is accounted for by net imports – mostly from French nuclear power stations.
This is equivalent to output from about 6 GWe of base-load capacity.
Italy is the fourth importer of natural gas in the world, such imports being sourced mostly from Algeria and Russia (and to a much lower extent from Libya, the Netherlands, Qatar and Norway).
Main sources of Energy:
Italian gross consumption of electricity in 2010 was 346,223GWh, of which 12.9 % was imported. In 2010 67.2% of the demand was met by conventional power plants burning fossil fuels imported to a very large extent from abroad; 20.6% of the demand came from renewable sources (hydro, geothermal, wind and photovoltaic) and the balance through electricity imports.
The nuclear programme that contemplated the building of eight new nuclear power plants was abandoned in 2011 in consequence of a popular vote in the aftermath of the Fukushima accident.
Natural gas accounted for 66.% of the total conventional fuel mix, coal for 17.2% and oil products for 4.3%. Other fuels (including biomass, waste and orimulsion) accounted for the balance. A massive shift towards natural gas has occurred only in recent years (in 1994 oil fuels accounted for 94% of the fuel mix).
Power generation in Italy holds natural gas as its main production source, counting for about 46% of overall generation. Hydro power is by far the RES-E source with the largest share in overall production (18.5%). Given Italy’s large amount of water resources, especially in the Alps, hydro power has been developed and largely exploited already in the past decades. As regards wind and solar, despite having had a steep increase in their shares in the last few years, they still amount only to 3.1% and 0.6% each in the overall generation share.
Extent of the network:
Given its geographical position, and its ratio consumption / generation, Italy has interconnections with all neighbouring countries, as well as one with Greece.
There is a large demand for additional capacity in areas where RES-E generation is mostly concentrated, that is the southern regions and islands. The grid infrastructure in these areas is traditionally weak, and thus needs reinforced to allow connection of requesting plants and expansion to accommodate future generation in a longer term perspective.
Potential for Renewable Energy:
Italy ranked among the world’s largest producers of electricity from solar power with an installed photovoltaic nameplate capacity of 12,773 MW at the end of 2011 and 330,196 plants in operation as of the end of 2011.The total energy produced by solar power in 2011 was 10,730 GWh, about 3.2% of the total electricity demand of 332.3 TWh.The installed photovoltaic capacity, compared to the previous year, has tripled in 2010 and almost quadrupled in 2011.
As of December 2012, the installed capacity is approaching 17 GW, with a production so important that several gas turbine power plants currently operate at half the their potential during the day. The sector provides employment to about 100,000 people, especially in design and installation.
The best wind resources in Italy are located in the south, particularly the Apennine Mountains and on the coast, as well as in the major islands. Also the relatively large off-shore potential is located in the southern coastal areas and islands. In perspective, this implies that a large share of non-programmable electricity would be fed into the grid in such areas. Unfortunately, the power grid in these areas is weak for historical reasons, since these areas are less densely populated and larger consumption centres are located in the North.
The maximum exploitation possible from current resources of biomasses, made up mainly of agricultural and forest residues, firewood, livestock manure and the biodegradable portion of solid urban waste, potentially equals 20-25 Mtep/year. Additional quantities of raw material can be produced by renovating the non-food agricultural sector and the forest sector, together with the recovery of abandoned agro-wood territories, which extend for at least 2 million hectares.
Water energy is by far the major national energy source in Italy and the principal indigenous resource alternative to fossil fuel sources. There are over 2000 hydroelectric power plants mostly in the Alpine region, of which only 300 have a production capacity of more than 10 MW. 80% of electricity is produced in large plants. In recent years, some small and medium plants under 10 MW have been added and they contribute 20% to the total production. The hydroelectric power plants in 2007 made up approximately 72% of the electricity production from renewable sources. However, its potential has been almost completely exploited.
The Italian geothermal potential to economically profitable depths is considerable, with high temperature resources (>150oC) concentrated in the foothills of the Apennines in Tuscany-Latium-Campania and on some volcanic islands of the Tyrrhenian Sea. It has resources of medium and low temperature (< 150oC) on large areas of the national territory. The high-temperature resources lend themselves to the production of electricity and direct uses, while the medium and low temperature resources can be utilized mostly for the production of heat.
Potential for Energy Efficiency:
As of 2011, the transport sector contributed most to Italy’s final energy consumption, with 30.4%, with the residential (24.8%) and industrial (22.8%) also contributing significantly. Significant progress has been identified as possible in the transport sector, although the current National Energy Efficiency Action Plan only mentions a few disparate measures to tackle efficiency in the sector, and the majority of proposals still in the planning stage for transportation. Industrial and commercial efficiency is well-addressed however, both on the supply and demand sides, with white certificate schemes being the driving policy instrument. Minimum energy performance standards and energy performance certificates schemes have also been proposed to address the efficiency gap in the residential sector, under the current NEEAP.
Driven by Italy's obligations to comply with Directive 96/92/EC concerning common rules for the internal market in electricity, the Italian electricity market was liberalised in March 1999 after almost 40 years of state nationalization. Previously, the whole electricity market was under the monopoly of a single vertically integrated and state-owned company: ENEL. The transmission and distribution networks were also controlled by ENEL, with the exception of few cities where there were local municipal electricity undertakings.
Not only the European directive was followed, but the transition to the free market was planned to be faster, with more than 40% of electricity planned to be traded on the free market by 2002 and with a corporate separation of activities. Some of ENEL's core activities were passed on other companies. The network was transferred to a new company, Terna, responsible for the management of the system. Moreover, the limit on ENEL property share of Terna was set at 20%. ENEL eventually sold its remaining share of the company in January 2012. In order to improve competition and to develop a free market for production, ENEL was also forced to sell 15,000 MW of capacity to competitors before 2003. Following this, three new production companies were created: Endesa Italia, Edipower and Tirreno Power.
Nevertheless no consistent trend or strategy is apparent in the Italian energy sector other than a strong liberalization drive throughout the 1990s – which has not effectively dismantled the role of ENEL (now partially privatised with Italian government control) other obliging it to sell plants – generating new strategies and alliances in the market and involving municipalizzate and multinationals on a more or less level playing field.
At the 2000s, Italy started the liberalization process of its energy markets following in the steps of the European Directives. Ten years later, the gas industry is fully liberalised but competition has yet to reach its full potential with a few players still dominating the upstream and wholesale sector. And while the retail sector is more fragmented, market concentration is still significant.
Structure / extent of competition:
Italy’s electricity sector was liberalised in 1999. Italy’s electricity market was fully open to competition including households by 2007. The main companies involved in electricity generation in 2011, listed by their share of national production, were:
- ENEL: 26.4%.
- Eni: 9.4%.
- Edison: 8.4%.
- E.On: 5.2%.
- Edipower: 4.8%.
- Tirreno Power: 3.8%.
- A2A: 3.5%.
- GdF Suez: 3.1%.
- ERG: 2.5%.
- Sorgenia: 2%.
- Iren: 2%.
- Others: 28.9%.
Supply is divided into the wholesale and retail levels. In 2011, wholesale supply was divided between:
- OTC transactions by independent traders (42.1%);
- transactions in the power exchange by independent traders (35.4%);
- purchases by Acquirente Unico, the company granted with an exclusive right to the wholesale procurement of electricity to be supplied under a regulated tariff to end users (15.4%).
The remainder of the supply was negotiated abroad or in order to provide a back-to-back physical balance of financial transactions (including contracts for differences agreed on strike prices). Major retail suppliers include: ENEL, Edison, Acea, Eni, Iren, Hera, E.On, and Dolomiti Energia.
The sector has changed radically over the last few years. The European Union’s Internal Market in Electricity Directive (2009/72/EC) led to the gradual opening up of internal markets and the creation of a single European energy market was completed in 2007 in all EU countries.
One of the consequences of harmonising the energy markets was the juridical separation of the electricity generating and supply companies from the transport and distribution network. This led to the dismantling of the vertically integrated structure of ENEL, the Italian public company which previously owned and controlled most processes of the energy cycle in Italy. ENEL was privatised in stages and was divided into various separately controlled entities that now manage the different phases of the energy process. Together, however, these companies remain the principal energy suppliers in Italy, even though the free market increased the number of enterprises in the sector.
Italy’s gas sector was liberalised in 2000. Italy’s gas market was fully open to competition by 2003. The upstream sector is still dominated by Eni, which accounted for 83% of the gas produced in Italy in 2011. Other producers include Royal Dutch Shell, Edison, Gas Plus and others. There were a total of 308 active companies in the retail sector, but despite a high number of operators, the retail market remains very concentrated. Eni alone accounted for 26.8% of the gas sold, with a spread of about 15% with its first competitor, ENEL. The companies with the three largest market shares (Eni, ENEL, Edison) controlled almost half of the market (49.5%). The share of the five largest operators (the first three plus Gdf Suez, A2A) represented 60.9%, denoting a much higher concentration than in the wholesale market.
Liberalization measures failed to change Eni's exclusive transmission rights in transit pipelines located outside Italy (which it helped to build when it as a vertically integrated monopoly). Consequently, ownership unbundling of Eni and Snam was not sufficient to introduce competition. To conclude, despite several measures to restrain its dominant position, Eni remains important throughout the gas chain. Eni's market share fell thanks to the antitrust ceilings and gas releases, but it retained control of storage, as well as the majority of production and import infrastructure, limiting competition in the natural gas market sector.
Existence of an energy framework and programmes to promote sustainable energy:
In order to comply with the EU renewable energy directive, Italy is required to source 17% of its final energy consumption from renewable energy sources by 2020. To meet this requirement, Italy has implemented various policy measures to stimulate investment in renewable electricity generation, renewable heating/cooling, and transportation. According to Italy’s National Renewable Energy Action Plan, the country is targeting 26.4% of electricity from renewable sources by 2020. According to the Italian government Italy had nearly met its renewable electricity production goal at the end of 2011, nearly eight years ahead of schedule.
Italy’s strategy for achieving climate mitigation goals has relied heavily on increased use of renewable energies. Economic incentives for electricity generation, in the form of feed-in tariffs and tradable renewa¬ble energy certificates (green certificates), have been at the core of the renewables policy mix. These sup¬port programmes have driven a dramatic increase in generation of electricity from renewable sources and have helped stimulate growth and employment in the renewables sector.
To encourage deployment of renewable electricity generation, Italy has used a variety of incentive policies such as green certificates, feed-in tariffs, market premiums, and reverse auctions. As a result of generous solar PV FiTs, declining solar PV equipment prices, and high quality solar resources, approximately 7,900 MW of solar PV capacity was installed in 2011. Italy was the largest solar market in the world that year. As of the end of 2012, Italy was ranked second in the world in terms of total installed solar PV capacity, with nearly 17,000 MW; second only to Germany.
However, in an effort to reduce the cost of financial incentive programs to electricity consumers—and since the country is very close to achieving its 2020 renewable electricity target—Italy has imposed annual FiT support limits for renewable electricity generation. In June 2013, the solar PV annual support limit of €6.7 billion was reached and FiTs for new solar PV projects will no longer be available after July 2013. While residential solar PV continues to be incentivized through tax rebates and net metering laws, Italy’s solar PV market might not return to 2011 levels in the foreseeable future.
A new incentive system based on FiT for all types of renewable energy is applying from 2013 on. There will no longer be a market for GCs in Italy after 2015, the point in time when the binding quota of green electricity to be fed into the national grid by producers of energy from conventional sources will be eliminated, and the obligation of the state-owned Gestore dei Servici Elettrici (GSE) to purchase excess GCs will cease.
On the new FiT see also below section on regulatory framework.
Current energy debates or legislation:
Overall, renewables accounted for about 10% of gross final energy consumption in 2010, up from less than 5% in 2005 and above the intermediate target set by the Renewable Energy Action Plan. Therefore, Italy is on track to meet its 2020 target of 17% of renewables in gross final energy consumption. However, such rapid progress has entailed increasingly high costs, mainly due to the rapid growth in installed solar photovoltaic capacity. Solar power has been prioritised at the expense of more cost-effective options, such as use of renewables for heating and cooling. In addition, the cost of abating one tonne of GHG emissions implied by these incentives is estimated to be relatively high. The government adopted new rules in 2011-12 aimed at aligning incentive rates with the decreasing costs of renewable technologies, redressing the bias towards solar power, and better controlling costs for electricity consumers in the period to 2020.
Major energy studies:
Italy is member of the EnR, which is a voluntary network of European energy agencies which aims at promoting sustainable energy good and best practice. EnR also strengthens cooperation between members and other key European actors on all sustainable energy issues (energy efficiency, sustainable transport and renewable energy).
Role of government:
Ministry of Economic Development
Ministero dello Sviluppo Economico (MISE)
This ministry is responsible for national energy policy. It supports industrial R&D through financial intervention. MISE has a new Department of Energy divided into three Directorates-General (DGs): DG for Energy and Mineral Resources, DG for Security of Supply and Energy Infrastructure, and DG for Nuclear and Renewable Energy.
Ministry of Environment and Protection of Land and Sea
Ministero dell’Ambiente e della Tutela del Territorio e del Mare (MATTM)
This ministry is responsible for co-ordinating policy on climate change. Together with the Ministry of Economic Development it is responsible for promoting and developing renewable energy and energy efficiency.
Government agencies in sustainable energy:
Multiple government organizations are involved in Italy’s renewable electricity policies. The Ministry of Economic Development issues ministerial decrees that define support policies for renewables. Italian energy service provider Gestore dei Servizi Energetici (GSE) is responsible for managing the implementation of renewable electricity incentive programs. GSE issues and qualifies green certificates and manages the feed-in tariff/premium schemes in Italy. Gestore dei Mercati Energetici (GME), the electric market administration, manages trading of green certificates. Finally, Autorita per l’Energia Electrica e il Gas (AEEG), the electricity regulator, defines certain procedures and can impose penalties for non-compliance with renewable electricity laws.
Energy planning procedures:
To accelerate the overall authorization process the Renewable Energy Decree simplified the procedures for building and operating renewable energy plants.
The new Single Authorization procedure (Autorizzazione Unica or AU) now takes only 90 days rather than 180 days. However, this period does not include the time required for the environmental impact assessment (Valutazione di Impatto Ambientale).
The Italian transmission system operator (TSO), TERNA S.p.A, is in charge of grid planning in the country. The Minnstry of Economic Development (MoED) and the national regulatory authority, the Regulatory Authority for Electricity and Gas, also play key roles. TERNA is legally obliged to devise yearly development plants covering the forthcoming ten years, based on information and data provided by other system operators, the Italian railway, their own assumptions and independent consultations. The draft network development plan is then submitted to the MoED, which consult with regional bodies which will be affected by the plan, in addition to the national regulator conducting a public consultation. The MoED has final control over approval of the plan, which becomes legally binding for TERNA once approved, as well as for the transmission asset owners affected. Implementation is monitored by the national regulator.
Energy regulator Date of creation:
The market is regulated by the Energy and Gas Regulatory Authority, the AEEG, created in 1995.
Degree of independence:
The AEEG is an independent authority led by five commissioners appointed by the government with the approval of a two-thirds majority of the competent parliamentary commissions.
Regulatory framework for sustainable energy:
In July 2012, Italy issued a ministerial decree that described a new feed-in tariff/premium program for renewable electricity generation from sources other than solar PV. The program aims to replace the quota and green certificate program. It has an annual expenditure limit of €5.8 billion of total annual costs. Once this limit is reached, financial support for new non-solar renewable power will no longer be available.
Italy’s non-solar FiT/premium incentive policy includes several provisions for projects based on the size of the project and the renewable resource used to generate electricity. Some projects of certain sizes can receive tariffs, while others are only eligible for market premiums. For example, five market premium levels are available for wind projects that range in size from less than 20 kW to more than 5 MW. Premiums are added to the electricity market price received. Total compensation levels for onshore wind projects, including the price of electricity plus the market premium, range from €0.127/kWh to €0.291/kWh, depending on the project size. Feed-in tariffs/premiums are available for the first 20 years of onshore wind project operations. Wind projects smaller than 60 kW have direct access to the premium, while projects between 60 kW and 5 MW must apply to a registry with an annual capacity installation limit of 60 MW for the years 2013 through 2015.
Starting in 2013, support for onshore wind projects larger than 5 MW is available through a reverse auction process—managed by GSE, the transmission system operator. The amount of new wind capacity eligible for incentives is limited to 500 MW each year for the years 2013 to 2015. The reverse auction process is managed by GSE, which accepts bids from projects during a 60-day open application period. In order to prevent projects from either under- or over-bidding into the reverse auctions, Italy has prescribed floor and ceiling premium values that cannot be exceeded.
The current version of Italy’s solar PV incentive policy, the Conto Energia V, entered into force in August 2012 and provides guaranteed feed-in tariffs and premiums for 20 years. Conto Energia V introduced average incentive cuts of 43% for ground-mounted installations and 39% for rooftop systems when compared to incentive levels that were available prior to August 2012. FiTs range from €0.106/kWh to €0.182/kWh depending on the size and location of the project. Additionally, the policy encourages self-consumption (on-site use) of solar PV electricity by providing premiums (€0.024/kWh to €0.100/kWh) for electricity that is consumed on site and not fed into the electric power grid.
The Conto Energia V policy includes an expenditure cap of €6.7 billion annually for solar PV FiTs and premiums.106 On June 6, 2013, Italy’s electricity and gas regulator announced that the expenditure cap had been reached and FiT and premium incentives would no longer be available for new PV projects after July 7, 2013.107 However, Italy has introduced a tax-based policy that allows owners of rooftop PV systems that are less than 20 kW in size to deduct 36% to 50% of the system capital expenditure from an individual’s income tax over a 10 year period. Italy has also introduced a net metering policy that allows solar projects with capacities less than 200 kW to receive compensation for electricity generation that exceeds the amount needed for self-consumption. Analysts forecast that the combination of tax deductions and net metering will support future solar power deployment in Italy, but at much lower levels when compared to solar PV installations in 2010 and 2011.
The AEEG is responsible for, inter alia, overseeing access of market operators to the gas and electricity grids and storage facilities, setting tariffs for access to the gas and electricity grids, promotion of fair competitive practices, protecting consumers’ interest, promoting market transparency and energy efficiency. The AEEG may issue regulations that apply to market operators, and orders and decisions affect single operators.
Role of government department in energy regulation:
As of March 2012, the Italian government is required to identify assets that are strategic to the national interest in the transportation, telecommunication and energy industries. Any corporate resolution or proposed act of transaction which may result in the transfer of ownership or control of such strategic assets is required to be notified to the government, which reserves the right to veto such resolutions/acts where they would represent an actual threat to national security interests.
Despite progress, Italy’s renewables and energy efficiency policies have lacked a general long-term vision. Management of the incentive systems for energy efficiency and renewables involves a number of different agencies and institutions, which results in co-ordination difficulties and increasing transac¬tion costs. There has been a multitude of overlapping measures, which have also changed several times within a few years. This has created unnecessary complexity and regulatory uncertainty, although recent measures have addressed some of these problems. In addition, the interaction between energy efficiency and renewables’ incentives and the EU-ETS requires ongoing evaluation, as these initiatives could further depress the CO2 allowance price and lead to displacement of emissions. A long-awaited national energy strategy was released for consultation in 2012, and provides the opportunity to address all these issues in a comprehensive way.
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