Some 452 MW of new wind capacity was installed in Italy last year, bringing cumulative capacity to roughly 1717 MW, according to Luciano Pirazzi of Ente Nazionale per le Nuove Tecnologie, l'Energia e l'Ambiente (ENEA), the main government agency responsible for promoting renewables. This is comfortably above the previous record of 357 MW set in 2004 and seems to indicate that the days when Italy struggled to add 100 MW a year are definitively in the past.
"The reason for the good year is mainly the attractive tariff structure for green certificates," says Christof Stork, Italy country manager for wind energy consultancy Garrad Hassan. "The green certificate structure is also now just better understood by the various players involved, and particularly by investors."
In addition to the price received for the sale of electricity, wind energy producers in Italy are also issued green certificates related to the output of a wind plant for its first eight years of operation. The certificates can be sold either on the regulated market or through bilateral trades to electricity producers and importers that are not able to satisfy a legal obligation to supply a small but growing portion of their electricity from renewable sources. Initially set at 2%, the obligation rose to 2.7% in 2005 and 3.05% in 2006. The government has yet to set the requirement for 2007 onwards, providing one element of uncertainty for the future.
A reference price for green certificates is set by grid operator Gestore della Rete di Trasmissione Nazionale (GRTN) -- and it has been high enough to attract investors. In 2005 the GRTN price was EUR 0.10892, up from an already attractive EUR 0.09739/kWh in 2004. At the same time, the price for the underlying electricity has also been climbing and has reached about EUR 0.07/kWh.
How much money is actually pocketed by owners depends on how the wind farm project financing is structured, notes Udo Follrichs of German wind developer Windkraft Nord, which has been active on the Italian market since 2001. "If it's geared to having low equity then banks require a long term contract for green certificates and then you have to sell at a discount to the reference price, but the prices are nevertheless still good," he says.
Market players remain cautiously optimistic about short term prospects, with expectations that Italy will at least be able to replicate its 2005 showing this year. One wild card is represented by the island of Sardinia, where the local government approved a moratorium on the construction of new wind plants in late 2004, but where a number of already authorised projects were completed last year. Regions where developers are hard at work include Sicily, Campania, Apulia and Calabria.
"Considering the orders in place until now for 2006, we should have about the same megawatt installed this year as in 2005," says Frank Geffers, who heads the energy team of law firm Puopolo Geffers Rosen & Bosin. "If Sardinia contributes to the figures and some projects there really get underway now, we might even have some upside."
Geffers says that one problem is the increasingly long delivery time for wind turbines. Given the frequent difficulties in the Italian authorisation process, he notes it is important to get turbines in the ground as soon as the official go-ahead to projects is given.
Indeed, growth in Italy has come even though the country continues to be a difficult one for wind energy players. "The historical problems remain," notes ENEA's Pirazzi. To begin with, a patchwork of site-permitting procedures existing throughout the country, one factor that leads many participants to stress the importance of a local partner for development work.
As 2006 begins, another year has gone by without the government laying the ground rules for a uniform site-permitting process at national level. Nor has the responsibility of individual regions for contributing to national renewable obligations been established -- yet it is at the local level that administrations decide to accept or reject plant proposals. Developers also point to the long period of time required for connections to the grid network -- though in December the energy regulator approved more favourable terms for grid connection of renewables.
Despite the problems, the market is nonetheless proving attractive to investors. "We have well-known and established players that are continuing to do their business, but we also see a trend of big foreign players, not only in energy but also in the investment sector, who are entering the market," notes Stork.
Among the familiar faces on Italy's wind energy scene is part-American developer Italian Vento Power Corporation (IVPC), the indisputable old hand in Italy's wind market. Last year, IVPC continued to play a lead role and was responsible for 131.6 MW, or about 30%, of new capacity installed.
Newcomers include Spanish wind firm Corporación Eólica (CESA), which has just been snapped up by its larger competitor, Spanish Acciona (page 27). Through its 50-50 joint venture with Italian energy group Erg, CESA made its first investment in Italy in November with the acquisition from Gamesa of a 31 MW wind farm in the region of Abruzzo. This year, the venture -- known as Erg Cesa Eólica -- is also constructing a 120 MW wind plant in Calabria. Other Spanish companies have also been active of late, with utility Endesa beginning construction on two Sicilian wind plants and acquiring a 51% stake in the Italian wind energy group MF Power. Fellow Spanish utility Iberdrola has rights to the development of some 300 MW in Italy.
On the investment side, one development of note last year was appearance on the scene of German insurer Allianz, which acquired a 72 MW wind plant in Sicily as the first step in its strategy of investing in long term renewable projects. The project was acquired from Aerosol, Windkraft Nord's joint venture with three Sicilian partners and will feature Vestas 3 MW turbines, the first use of the machines in Italy.
For Windkraft Nord, the Sicilian wind plant is the German developer's first in Italy to reach the construction phase five years after arriving in Italy. Four other sites in Sicily and one in Calabria are also being developed.
Among wind turbine suppliers, Vestas continues to dominate, but market players expect the current shortage of wind turbines to provide more room for the emergence of new players. In January, German turbine producer Nordex announced its first sizeable deal in the Italian market, with an agreement to sell 14 of its 1.5 MW model to Energia Verde, a subsidiary of Denmark's Greentech Energy Systems, for a 21 MW plant that will be constructed in Sardinia this year. Among Greentech's owners is one of the founding owners of Nordex. Barcelona-based turbine producer Ecotècnia has also opened a sales office in Italy.