New decree sparks lots of activity -- Italy cuts the red tape

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The wind development industry has great expectations of Italy. Despite being tied up in miles of red tape for the past several years, it has nonetheless managed an annual installation rate of about 100 MW. Last month, the red tape was removed, at least in theory. Italy's long awaited renewable energy decree came into force on February 15. If it works as intended, installed capacity will be a great deal more than today's 900 MW by this time next year. All the major players -- and several new -- have major development in the works.

Since 2002, the Italian wind market has been driven by an obligation on power companies to source 2% of their electricity production from renewable energy. The market is facilitated by green credit trade, which enables companies with credits in excess to sell them to those with a shortfall. But with a site permitting system that often required years of negotiations to complete and no organised system for allocating space on the grid for new wind plant, developers have found themselves tied up in knots.

The new decree aims to put an end to both problems and ensure that Italy lives up to its EU directive commitment to increase the share of renewables from 20% to 25% -- and so far the industry "seems quite satisfied" with the legislation says Paolo Montanari, a wind market consultant. His company, MX Matrix, is advising on several projects. "The decree simplifies the rules of the permitting process and gives a general framework for the rules the different regions will establish for deciding the distribution of the obligation between them," he adds.

Italy, says Montanari, is determined to meet its Kyoto Protocol commitments. The 2% renewables mandate will increase in annual increments of 0.35% from 2004 to 2006. A review of how the system is doing will be held in mid-2005. If it works, the decree's streamlining of the complex site permitting system will significantly speed up development. The law reduces the number of permits required from various local and central authorities from 20-30 authorisations to just one piece of paper.

"The transition period will show how it really works, since it is written to cover all the aspects of all the renewables, including grid connection rules, pricing etcetera. The first verification will be in observing how the different players react to the new permitting rules," says Montanari. First, however, three government ministries have to agree on the guidelines to be issued to the regions on how to implement the government's demands. The environment ministry, the industry ministry, and the ministry responsible for preserving Italy's rich cultural heritage will all have a say in the matter.

"The second check will be the behaviour of the regions. They have to comply with the future guidelines and will have the main say in deciding where they accept wind plants and where not," says Montanari. "In the end, however, the decree is a strong signal towards a more rational and steady growth of the renewables."

Already the nature of the Italian wind market is shifting away from one dominated by a single major player to one in which major utilities can now find a way to get involved. Last year, independent wind power producer Italian Vento Power Corporation (IVPC), a company of American and Italian interests with years of experience in how to pull the right strings, was knocked off its perch as lead developer by Italian utilities Enel and Edens. They used a mix of technology from Gamesa, Vestas, Enercon, and small Germany company Fuhrländer. To date, however, IVPC, which has exclusively used Vestas technology, has installed more than 600 MW of Italy's total.

"This year a lot is happening. We still see at least 200 new megawatt and new players," says Montanari. One of them will be German developer Energy-Consult Projektgesellschaft, which reports that it expects to install 98 MW in southern Italy this year and next.

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