The fact that it is foreign technology making inroads on the Italian market is probably the reason why the country is making so little fuss about its flurry of wind development. Add to this the knowledge that the developer, Italian Vento Power Corporation (IVPC), is a consortium of mainly American and Japanese interests, then it would seem that the dent to Italian pride has had a distinct silencing effect. If all goes well, IVPC expects to have a controlling interest of up to 390 MW of the 700 MW of wind power the government is subsidising with premium kilowatt hour payments for eight years.
It is perhaps significant that it is a foreign team which has finally cracked open the wind market in Italy. A decade of enthusiasm from the Italian government, including the setting of a 300 MW goal for wind capacity by 2000, the financing of demonstration programmes, the introduction in 1992 of the highest premium payments for wind in Europe, and even a requirement that state utility ENEL buy the wind power, was all to no avail. Italian bureaucracy was such that potential wind developers chose not to become entangled in what was perceived as a tricky and possibly only short term market. Most of those that did are apparently still tied up in knots somewhere.
Into this vacuum of red tape stepped a unique combination of personalities: a determined young veteran of the California wind market, Brian Caffyn, formerly of Cannon Power Corporation, and a savvy Italian lawyer, Oreste Vigorito. Together they founded Italian Vento Power Corporation in September 1993, rolled up their sleeves and set to work. Four years later they are achieving what others spent a decade only dreaming about.
With 59.4 MW of wind plant safely in the ground, the pair are busy with the next 110 MW for which they have power purchase agreements with state utility ENEL. The largest project in this round is a 54 MW wind plant, the Molinara Ridge Project, to consist of three 18 MW ridge line developments. Construction on the civil works is now underway. The remainder of the 110 MW is made up of a series of additions to two of the existing five wind farms (table). Montefalcone will be extended by a total of 22.8 MW in two phases of 12.8 MW and 10 MW, both to be running by May. A year later a 33 MW addition should also have been completed to the 3 MW Alberona plant.
The grand total for completed wind plants, for those under construction, and for those in an advanced stage of planning thus stands at 170 MW. Not that IVPC has any thought of stopping there. Already negotiations are going ahead for another 60 MW, in Panni and Accadia, although construction is not expected to start until 1998 or 1999, according to IVPC's Giovanna Valverde. "There is no reason why Italy cannot be a 1500-2000 MW market," says Caffyn. "Our expectation is that we will do between 500 MW and 1000 MW over the next five to ten years."
Financing the key
Caffyn is fond of the word "persistence." It crops up frequently when he talks of the achievements of IVPC and its plans for the future. "We stuck with it and we spent a lot of money," he says of IVPC's success. But, in an acknowledgement of the vital role played by his Italian partner, he comments: "You couldn't have done this unless you are a lawyer in Italy."
IVPC approached the Italian market in much the same entrepreneurial spirit as wind developers entered California in the early 1980s. "The reason that nothing significant got accomplished in Italy before is that they were relying on a subsidised mentality," comments Caffyn on his hapless would-be competitors. Strong financial backing held the key, he says. Since 1995 IVPC has been 50% owned by the UK division of Japan's Tomen Power Corporation. "Getting Tomen involved was important. It made getting finance from commercial banks possible," says Caffyn.
All of the 59.4 MW of projects in the ground have until now been 50% owned by Tomen and 50% by IVPC. The next stage, soon to be complete, is to secure project financing for both the existing projects and for the next 110 MW. "We are working with Babcock and Brown, our financial advisor, and Tomen to complete this financing with NatWest Markets for approximately ITL 370 billion ($220 million). When completed, it will be one of the largest wind project financing contracts in history," says Caffyn.
IVPC has secured no less than 13 power purchase contracts with ENEL under a 1992 law which requires the utility to play ball with independent generators. The contracts run for 15 years on a fixed tariff which escalates to keep pace with a predefined inflation index. The tariff is topped up by a government renewable energy subsidy for the first eight years, also linked to inflation, which currently pays an impressive ITL 197/kWh -- about $0.11.5/kWh. This drops by about half once the subsidy period expires, says Caffyn.
Economies of scale, too, have played a large part in making IVPC's first 170 MW of projects viable, adds Caffyn. All the wind turbines have been 600 kW machines from Vestas, mainly the V42, though the V44 with its slightly larger rotor is also in the frame for some sites. Vestas delivers the wind farms as turnkey projects, but IVPC is solely in charge of the management of them through a series of separate operating companies.
The timing of each phase of development -- currently split into three distinct phases from 1996-1999 -- is linked to the grid interconnection arrangements made with ENEL , says IVPC. Grid reinforcement and sub-stations are part of the negotiated contracts.
The wind farms constructed so far have been built in the Apennines, some 100 kilometres north east of Naples. The turbines are strung in mainly single line formations along a series of north-south ridge lines to make the most of the prevailing westerly and south westerly winds. Typically the wind turbines are sited at a height of 900-1000 metres, which, says IVPC, is high enough to make the most of the winds, but low enough to avoid severe winter weather.
Essentially all the 170 MW of projects currently being financed are grouped in two distinct areas: the 49.2 MW wind farm which makes up the Monteleone, Sant Agata and Anzano developments sends power to Foggia, while to the north west the expanding Montefalcone wind farm (30 MW when complete), the 54 MW Molinara Ridge Project under construction, and the Alberona project (36 MW when complete) feed into three sub stations linked to the main grid joining Colle Sannita and Benevento.
The wind farms are spread across the jurisdiction of a number of local authority regions, not making the complicated permitting process any easier. Without Vigorito, Caffyn cannot imagine how IVPC would have secured building permits. But in terms of square metres of foundation, the wind farms do not occupy enough land to require a change in the region's zoning designation -- making the process a great deal easier than at first presumed. And the area is sparsely populated, with a limited number of dwellings near the wind farms. Some villages, though, are only a kilometre away from the nearest turbines. Typical village populations in the region range from 1000 to 3000 inhabitants. According to IVPC, however, they are "located on the downwind slope of the ridges and are largely unaffected by any potential noise or visual impact."
Caffyn assures: "We have not had any serious opposition." The local community council, the commune, receives 1.5% as compensation for any inconvenience caused by the presence of the wind farm, or as Caffyn expresses it, "to cement the community relationship." Individual landowners receive a fixed annual payment for the rent of their land.
With 60 MW in the ground, with 110 MW in progress, and with the next 60 MW phase beginning to shape up, IVPC's current wind development activities total 230 MW. All of this is within Italy's 700 MW market incentive programme for wind, first outlined in a Directive of the Interministerial Committee on Prices in 1991 and since updated (CIP 6/92).
Much of the remaining 470 MW of agreements is held by Italy's two domestic wind turbine manufacturers, Riva Calzoni and Wind Energy Systems Taranto (WEST). Riva Calzoni continues to manufacture its unusual monopteros turbine, with one blade, and recently installed a 10 MW project. WEST was formed in the late 1980s by Aeritalia and Alenia and has long attempted to produce a competitive wind turbine from its MEDIT design, several of which operate in a handful of demonstration projects.
Whether all of the government's 700 MW is developed remains a matter of considerable uncertainty. Time is running out on many of the interconnection agreements with ENEL and these will be terminated in due course. IVPC, however, has its eyes on this pool of unused government agreements. "We hope to acquire control of some of these contracts from other developers and expect that we will have completed and control the majority of the 700 MW which is actually developed and constructed," says Caffyn.
IVPC is far from putting all its eggs in one government basket, though. Caffyn says the company is already negotiating power purchase agreements for 200-300 MW outside the programme. A government decision on these talks is pending. Much will depend, he says, on the new pricing provisions in the next round of government legislation for renewables and electricity market regulation.
(Earlier feature articles on wind power in Italy appeared in the following issues of
Windpower Monthly: April 1991, November 1992, March 1994).