The uncertainty is because of the soon to be realised shift from a market existing on direct state subsides to one where the government sets a market framework in the form of a renewables obligation. All sellers of power to the retail market must demonstrate, through the ownership of renewable energy credits, that they comply with the obligation. In this way, the environmental value of wind power finds its market price, instead of government dictating price through a subsidy.
The obligation is linked to construction permits. Permission for all new power plant development in Italy is conditional on 2% of the planned new generating capacity coming from renewable energy. The Italian industry ministry is targeting 3000 MW of wind in the next seven to eight years. About 700 MW is operating today.
The catch is that although the law is in place, the rules for how it works are not, Caffyn says. "They didn't clarify everything. The primary issue is that it's still new. Not everybody is comfortable yet. There is a power pool but it's not operating yet." He adds that electricity consumers will not have to buy green certificates until March 2003 -- and that has hurt future planning. "It's hard to get anybody to focus on this. Until the money has to come out of the pocket, a lot of people won't be truly in the frame of mind to negotiate long term contracts. And there's a lot of speculation what the long term price might be."
IVPC, like other developers, used last year to finish building projects under the old CIP6 law, which guarantees a price for renewables power of about EUR 0.10/kWh for eight years. IVPC4, an IVPC subsidiary that was active last year (Windpower Monthly, April 2000), built and energised 158.4 MW in 2001, out of 230.34 in operation and nearly 400 MW total in all IVPC companies.
Caffyn says the company plans to build a further 50 MW under the old CIP6 structure as well as 50-100 MW outside of CIP6; of the latter, none is yet financed. "Basically, we don't have power contracts with [state utility] ENEL anymore. So we either go out and enter into separate power contracts or go out on merchant basis. I think we're going to go with these on a merchant basis," he says. "We'll see if we're successful. It hasn't been done often in the wind industry on merchant basis, and it certainly hasn't been done that way in Italy."
Regardless, Caffyn does not predict many new turbines in the ground this year. But he says that a number of corporate operations will start building some megawatt or start projects, including oil and gas companies, municipal entities, energy company Edison Energia and ENEL GreenPower, an ENEL subsidiary. "I think by the end of the year you'll see quite a few projects started but not finished," Caffyn says.
Another company hard at work on completing a CIP6 contract is German wind turbine manufacturer Enercon, which is fulfilling an order from Edison Energia's subsidiary, Edens. By the end of 2001, Enercon completed the first part of the order for 132 MW using 600 kW machines -- a project that was started in 2000. Work completed on this plant plus some other small ones in 2001 amounted to 87 MW. The company has also been working to complete a 45 MW extension to the Edens project by the start of this month. "If the weather holds out," said the company's Kurt Steurken. The plant is going up in the rocky mountains of Abruzzo and ice and up to two meters of snow have brought cranes to a standstill.