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Italy

Italy

Poor take-up in FIT auction signals slowdown for Italy

ITALY: The growth rate of Italy's wind sector is expected to fall dramatically after the first competitive feed-in-tariff auction (FIT) received bids for less onshore wind capacity than the 500MW capacity ceiling.

Early days: With fewer new installations expected, repowering coud become an important market sector in years to come
Early days: With fewer new installations expected, repowering coud become an important market sector in years to come

A separate offshore auction drew just one bidder.

Italian wind energy association Anev predicted the sector would now add only about 250MW annually. Even the most optimistic estimates see annual new wind capacity gains capped at about 400MW in the next few years, compared to roughly 1GW of new capacity installed each year since 2008.

Only 18 projects totalling 442MW participated in the auction for onshore wind projects above 5MW, and all were awarded a FIT. Some of these projects are under construction and were already eligible for a subsidy if completed by April 2013, making their FIT auction bids little more than insurance against late completion.

One silver lining in the auction was the fact that some major investors saw a business case for Italian wind projects at prices well below current levels. State energy management agency GSE, which ran the auction, said onshore wind FITs were awarded at an average discount to the €127/MWh base bidding price of 7.8%.

Grid parity close

Discounts varied from the 2.5% offered by Italy's Erg Renew to the 24.4% Portugal's EDP Renovaveis agreed for one project in Apulia. That adds up to a FIT between €96/MWh and €123.83/MWh, compared to the current incentive level of around €155/MWh, although the new FIT will be for 20 years rather than the 15 years of the old system.

"Wind is getting closer to grid parity," says Tommaso Barbetti, a partner at renewable energy consultancy Elemens.

Just one 30MW offshore project participated in the offshore auction for 650MW in capacity, easily securing the maximum FIT, set at 2% below a base price of €165/MWh.

Repowering

A FIT was assigned to the maximum 60MW of small-scale projects, but there were no bidders for a 150MW FIT in repowering projects outside the auction process.

Repowering is st an early stage in Italy and repowered projects must go through the same authorisation process facing new wind farms. However, analysts believe repowering will be an increasingly important source of capacity growth as many of the best wind sites use old, less efficient technology.

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