Green certificates make for an attractive market -- Italy on course for 50 MW a year

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Italy added about 417 MW of wind plant in 2006 (table), bringing its cumulative wind power capacity to 2123 MW. While the 2006 figure fell short of the 452 MW record set the previous year, market sentiment remains generally positive and the pace of growth is expected to pick up again. Indeed, Emerging Energy Research (EER), a global research firm, forecasts that Italy will add roughly 500 MW to 800 MW annually to its cumulative capacity through 2015. "At the moment, Italy has one of the most attractive incentive schemes and incentive levels and some of the best resources," says EER's Catalina Robledo.

At least in 2007, that forecast should hold. "Italy should go comfortably above 500 MW this year and might even see as much as 800 MW in new capacity," says Luciano Pirazzi of Italian government agency Ente Nazionale per le Nuove Tecnologie, l'Energia e l'Ambiente. Pirazzi explains that the dip in new capacity last year is largely due to the fact that grid connections for some plants initially expected to be completed in late 2006 were pushed back to early 2007.

An attractive incentive system supporting the Italian market became even more attractive last year when the period for which premium payments are available for wind generation was extended from eight to 12 years. Producers of wind and other renewable energy are also issued with green certificates, which they can sell on the market for 12 years.

Each year, a reference price for certificates is set by electricity regulator Gestore dei Servizi Elettrici (GSE), which to date has been at or near that at which most trades take place. In 2006, the GSE reference price was EUR 0.12528/kWh, up from what had also been viewed as an appetizing EUR 0.10892/kWh the previous year. The 2007 price will be announced towards the end of the year. Buyers of the certificates are retailers of electricity, all of whom are required to contribute a small percentage of their total sales (3.05% in 2006) from renewable sources of energy. The requirement for 2007 and beyond has yet to be announced.

Siting barrier

"Only politics can stop the growth of wind energy in Italy," says Josef Gostner of Bolzano-based developer Fri-el. The incentive system works well, he says. The problem that remains is the lack of national rules for wind plant siting.

Since the approval of a landmark renewable energy law in 2003, market participants have been waiting the approval of national guidelines and the establishment of obligations on regional governments to play their part in meeting national renewable energy commitments by streamlining siting permits. While they wait, developers continue to be subject to a patchwork of sometimes confusing regional rules and stop-and-go wind energy policies.

The global shortage of wind turbines is slowing things down in Italy as it is elsewhere, but suppliers relatively new to Italy are elbowing for market share. Long dominant Vestas was knocked off pole position last year by Gamesa, which installed more megawatts than its Danish rival. Indeed, in terms of cumulative wind capacity, Gamesa overtook Germany's Enercon to become the second largest player in Italy. The largest turbines yet installed in Italy are 3 MW machines from Vestas, which were used in a Fri-el development in Campania. They will also be used in a 72 MW Sicilian project owned by the Specialised Investments unit of German insurance giant Allianz.

The players

Dominant developers in 2006 were Fri-el, Spanish utility Endesa's Italian arm and Moncada Costruzioni, a Sicilian construction group that diversified into wind energy a few years ago. Italy's old-hand in wind power, Italian Vento Power Corporation, continues to retain the largest market share, accounting for about one-third of the country's cumulative capacity.

Last year's wind activity concluded with large Italian energy group Erg, which already has an Italian wind energy venture with Acciona's CESA, finally wrapping up its takeover bid for wind developer EnerTAD. The deal demonstrates that consolidation is beginning in the Italian market and some local players are seen as potentially attractive targets for both Italian and foreign groups with a more international spread. With consolidation, Robledo of EER expects that the size of wind projects could also increase. "Larger players have deeper pockets," she explains. Many big players also have framework agreements for turbines that can come in handy in a world of constrained wind technology supply.

Where it's happening

Viewing the market geographically, significant capacity was added last year in the regions of Apulia, Sicily and Basilicata. Only recently has Basilicata been accepted as a wind friendly region. Elsewhere in southern Italy, the region of Calabria inaugurated its first 6 MW wind plant. Significant capacity growth is expected here in the future.

Newcomers, however, will find it hard to get a look-in. The wind market in southern Italy has largely already been carved up between developers. EER's Cristiano Spillato sees developers increasingly heading north to generally less attractive sites, with the construction of smaller wind farms no larger than 20-25 MW. Tuscany, Umbria, the Marches and even Piedmont are seen as being part of this trend. "In the south, many projects likely have been allocated for years. Developers there are just waiting for a big utility or foreign investor to come along," he says.

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