There is still uncertainty, however, about the rules and regulations governing certificate trading. As a result more prospecting than development went on in 2002: preliminary figures indicate that just over 100 MW of new wind plant went online, compared with over 260 MW the previous year. Nearly all of this was under the former CIP6 support program, which guaranteed EUR 0.10/kWh for eight years. According to the European Wind Energy Association, cumulative wind capacity at the end of 2002 was 785 MW.
"The 2% obligation is getting a lot of people to do a lot of development work, says Brian Caffyn of wind project developer Italian Vento Power Corporation (IVPC). "The only caution is that March is the first required payment date for certificates of 2002 vintage and we will need to see that payments are fully made -- by this I mean no waiver or partial waiver is granted by the government at the last minute -- to assure our financing."
Wind consultant Paolo Montanari of Italian company MX Matrix agrees. The reason for last year's development slow-down, he says, is due to the transition between the old support system and the new. "The new rule requires that the investor is willing to bet on the possibility of a good price for the certificates that his new plant will generate -- and there is less than needed evidence of that opportunity so far," he explains. "Furthermore, the rules to implement the new system are still not fully in place: there is a tendency to postpone the start of the official green certificates market."
By some estimates there are already more green certificates available than needed, suggesting the certificate reference price set by grid operator GRTN of EUR 0.08/kWh cannot be met (Windpower Monthly, September 2002). Some developers, like Germany's BVT Group, also say there is a risk that wind could be squeezed out of the market by the inclusion of waste incineration and cogeneration in the 2% quota. The Italian market is "very interesting but at the same time difficult," says BVT's Joachum Herrnsdorf. It hinges on the government following through and doing what it has said it will do.
Prospecting and preparation
"Assuming this is the case, this market should expand rapidly as things in the development pipeline start to mature, not just for ourselves but for everyone," says Caffyn. Montanari agrees. "Many difficulties should be removed this year and the next one," he says. Even so, there is no certainty yet. The 2% quota is set to increase annually by 0.35% to reach 3% by 2006, but this is "now a matter of discussion, rather than in force," Montanari points out. Until developers and investors feel confident about the market, the main industry activity in Italy will not be buying and building, but prospecting and preparation.
There are now plenty of companies doing just that, from a rash of smaller developers like BVT, through to a series of Europe's major power companies. BVT is trawling Italy for projects and hopes to make an acquisition this year, which will then be marketed to investors in Germany as a closed-end wind fund, says Herrnsdorf. Among the big companies are Germany's RWE and E.on, Belgian Electrabel and Italy's own ENEL, through its Energia subsidiary, all of which are developing projects while some have installed turbines this year. ENEL has also bought 154 MW of wind turbines from Spain's Gamesa, for installation this year and next, while Electrabel has bought 175 MW of Gamesa's Italian wind project portfolio in a deal which Gamesa says ties the Belgian company to using Gamesa turbines.
IVPC has so far been the major player in Italian wind power, installing 472.5 MW of the estimated 785 MW now in operation, although 28 MW of IVPC's total is still awaiting grid connection. IVPC uses Vestas turbines. The other turbine manufacturer to have benefited from the Italian market in 2002 is Enercon, which reports sales of 64.2 MW in eight projects, although this was not much more than half the volume it sold to Italy in 2001.
This year IVPC is working on financing projects with a combined capacity of 148 MW under the umbrella of IVPC Sicilia. Caffyn says the likely choice of technology will be Vestas-Italian Wind Technology 850 kW turbines. "We expect to close this deal by June, but we will be in construction in the next two months or so. Based on this, we expect to have most of this installed in 2003. For 2004 we would expect to install about 250 MW." Italian utilities ENEL and Edison Energia are also building. ENEL should have 114 MW turning by summer.
Aside from the political uncertainty, the future could be marred by site permitting problems, both with regard to environmental impact and grid connection. As restrictions are tightened, particularly on environmental compatibility, some popular areas like the south of Sardinia are now off limits, says Herrnsdorf. His fears are shared by Montanari. "We can also see an increasing opposition, mainly from the Greens, to the construction of wind parks on the ridges of the Apennines, mainly because of fears of landscape deterioration," he says, adding that such opposition makes dealing with local authorities more difficult and more costly.
Electricity market regulator GRTN is feeling the pressure on grid space. Just as has been the case in Spain, the Italian authorities have found themselves struggling to cope with the wind development rush. GRTN is swamped by dozens of grid connection applications, to the point that it was threatening to refuse to receive any more. The wind industry, warns Caffyn, is in need of some self regulation. For this reason, IVPC's Oreste Vigorito has spearheaded a campaign to create an Italian wind energy association.
"Things have been very crazy on certain things such as applications for connections, where we had five or six developers asking for connection in the same area for hundreds of megawatt when only one project of 50 MW might really be possible," says Caffyn. By working together, Caffyn believes the wind industry has assuaged GRTN's fears and averted the risk of a temporary moratorium. What's important now, he stresses, is for the industry to work together rather than trying to cut one another out of deals. "A rising tide carrying all boats is hard sell in Italy but we seem to be making progress," he says.