More strong market incentives -- Certificate prices stabilised

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Trade in green energy certificates is picking up pace in Italy following implementation of an amended renewable energy law that guarantees certificate price stability. An effective floor on the market price has been put in place, with Gestore dei Servizi Elettrici (GSE), the government agency responsible for the renewable energy incentive, required to buy any excess green certificates on the market up to the end of 2010. It will pay a rate equal to the average market price of certificates in the preceding three years.

All electricity retailers in Italy must buy a rising number of renewables certificates from wind power producers each year, but an oversupply of certificates in the market in 2008 drove prices down to EUR 0.065/kWh by the autumn. As a result, the combined revenue from sale of certificates and the physical electricity dropped to around EUR 0.15/kWh, still attractive by standards elsewhere in Europe but lower than recent levels seen in Italy and down on the EUR 0.18/kWh reference price set in Italy's 2008 budget (Windpower Monthly, September 2008). With the government widely expected to remedy the situation, trades in certificates stalled.

The new system, with GSE guaranteeing a market for all certificates at a given price, was introduced in a new law that came into force on January 2. The law also caters for a potential shortage of certificates preventing retailers from reaching their renewables targets and causing prices to rise above EUR 0.18/kWh: GSE will offer its own certificates for sale.

"In practice, this law introduces a floor for the price of green certificates and frees the market of a number of excess green certificates," says Simone Togni of Associazione Nazionale Energia del Vento (ANEV), the Italian wind energy association. Already the impact is being felt -- the price of green certificates has begun to recover with the combined price for electricity and green certificates standing at around EUR 0.17/kWh by mid-January.

Post 2010, certificate oversupply is expected to be less of a problem because demand is set to rise significantly in tandem with new mandatory renewable energy quotas for electricity retailers. The annual rise in the percentage of electricity that retailers must source from renewables is now 0.75%, up from 0.35% previously. This means they will have to source 7.55% of their electricity from renewables in 2012, up from 4.55% in 2008.

The new law is also expected to lead to a boom in small-scale wind power development at the local level. It introduces an attractive fixed price of EUR 0.30/kWh for wind plants up to 200 kW. "We pushed very hard for this measure and believe that culturally it is quite important," says Togni, referring to what has been fierce opposition to wind turbines in some parts of the countryside.

Italy, which installed 1 GW of wind power in 2008, is already one of the fastest growing markets for wind power in Europe, with more than 3.7 GW online, potentially putting it in third place in terms of total installed capacity behind Spain and Germany, depending on the volume installed by France last year.

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