Last year, 1.1GW in new capacity was installed in Italy, bringing the country's total to 4.8GW and placing it third in Europe behind Germany and Spain.
"Growth in line with that seen in 2009 is to be expected in the next two years," says Giuseppe Mastropieri, the head of renewable energy sources at energy research group and consultancy Nomisma Energia. Mastropieri believes a figure in the range of 1.2-1.5GW is not unthinkable this year. "There are lots of construction sites open," adds Luciano Pirazzi, wind energy expert with Italy's sustainable development agency ENEA, who sees around one gigawatt more being installed this year. Less optimistically, Luciano Santi, portfolio manager of Italian wind developer and producer Veronagest, expects a difficult project financing environment to limit new capacity to about 700MW.
The strong performance of the Italian wind sector over the last few years - just over 1GW was installed in 2008 - has prompted some to predict that the government could increase its 2020 forecast for wind energy when it presents its national renewable energy action plan to the European Commission later this year. The current forecast is 12GW, but Italy's wind energy association, ANEV, has estimated that 16GW could be installed by 2020. However, not all of Italy's wind industry believes this objective is attainable unless construction of the country's first offshore projects begins. As yet, no offshore projects have been authorised.
Preliminary figures from transmission system operator Terna show that wind accounted for around 1.9% of all 2009 Italian electricity consumption, up from 1.5% in 2008. Preliminary figures from the energy department of Italy's economic ministry are more optimistic, showing that wind represented 2.1% of all electricity production last year.
In 2009, the southern Italian regions of Apulia and Sicily were Italy's first two regions to pass the 1GW mark, and growth should be sustained in both of these regions this year. Sicily, the Italian region that grew the most with 321MW in new capacity, could win the claim to being Italy's leading wind region in 2010, stealing the accolade that Apulia has enjoyed for the last several years. While Sicily began to take a more conservative approach to the authorisation of new wind farms last year, the large number of projects already under construction should ensure the region enjoys another boom in 2010.
The southern region of Basilicata, with a current capacity of 227MW, looked more promising after the regional council gave its approval in January this year for a new energy plan to install 900MW by 2020.
This year, the Italian government is expected finally to provide a breakdown of the renewable energy obligation for each region, a move that is hoped will bring down barriers to the development of wind and other renewable energy raised by some regional governments.
High incentive prices, and the fact that Italy still has a long way to go before reaching its 2020 EU renewable energy obligations, have continued to support the market. Under the EU Renewable Energy Sources directive, Italy must source 17% of its energy - including that used for heat, cooling and transport, as well as electricity - from renewables by 2020.
Italy has traditionally rewarded wind producers generously, and these high prices by international standards have continued to attract investors. The prices, however, have declined significantly from two years ago. Total revenues for wind producers are the sum of revenues from the sale of electricity and tradable green certificates, which form the backbone of the Italian support scheme. In January, the combined revenue stream for electricity and green certificates was EUR0.15/kWh, while some companies were citing prices as high as EUR0.22/kWh as recently as 2008.
Meanwhile, the large number of companies now active in the market has also lessened the risk that a limited number of projects falling behind could significantly hold back the market. The number of turbine manufacturers active in the market has also increased steadily in recent years. In 2009, both Spanish manufacturer Acciona and Germany's Siemens debuted on the Italian market. Acciona saw its turbines installed on a 14MW project in San Giovanni in the region of Molise, while Siemens turbines were used on utility Sorgenia's 39MW wind farm in San Gregorio Magno in the region of Campania.
Grid and financing issues
One issue for the Italian wind industry is the grid's current inability to accommodate all the wind power that is produced. For grid security reasons, Terna has asked wind producers in regions with a high concentration of wind farms to limit production when the wind is blowing strongest. While there is a method for compensating lost production, it does not fully cover the revenues lost by wind producers. The forced production cutbacks began in 2008 and have shown no signs of ceasing in early 2010. While grid investments are progressing, the pace is slower than many developers would like.
Project financing has also continued to be a thorny issue. Luciano Santi of Veronagest notes that finance secured for new capacity installed in 2009 largely dates back to 2007, when there was a booming market for project financing. As 2010 gets under way, he expects banks to continue to take a more conservative approach to lending, inevitably slowing projects down. "Before banks cough up money, they think much more," says Santi. Adds Mastropieri: "Almost no project financing deals were reached in Italy in 2009."
Meanwhile, Italian economic development minister Claudio Scajola has promised this year to publish long-awaited national guidelines for the authorisation of renewable energy plants. Developers, however, are not expecting a quick fix to what can often be a long and convoluted process that differs from region to region. This is not unwise, since the guidelines were first called for in a key 2003 renewable energy law and have been promised by many politicians since then.
STATE OF PLAY
Wind production 2009
International 11.3 Power
Enel Green 8.5 Power
E.on Italia 5.8
Erg Renew 3.0