SUMMARY
These notes will briefly summarise the targets provided for by the European Union, the latest Italian trends, with a mention to the “Covid effect”, and the most recent normative news.
- TARGETS
As part of the European Green Deal, in October 2020 the European Council adopted the 2030 Climate and Energy Framework, setting forth plans to achieve a climate-neutral economy that would allow the Union to respect its commitments under the Paris Agreement and the United Nations’ 2030 Agenda[1].
The European targets set forth by 2030 are the following:
- at least 40% cuts in greenhouse gas emissions from 1990 levels
- at least 32% share for renewable energy (binding target also according to article 3 of Directive (EU) 2018/2001)
- at least 32.5% improvement in energy efficiency
Member States, like Italy, are required to adopt integrated national energy and climate plans for the period 2021-2030
According to the Plan, the Italian targets are as follows:
- by 2020, 17% of energy from RES in the gross final consumption of energy,
- by 2030, said share shall increase to 30%, with an indicative annual increase of around 1.3%.
Translated into Million Tonnes of Oil Equivalent (Mtoes), this means that the national target for 2030 projects a gross final consumption of energy of 111 Mtoe, with approximately 33 Mtoe of that coming from renewable sources.
- LATEST TRENDS
In recent years, the ratio between overall gross final consumption of energy and consumption covered by RES was higher than the European target of 17% set forth by Directive 2009/28/EC. In 2017, the overall gross final consumption of energy in Italy totalled around 120 Mtoe, with energy from RES totalling around 22 Mtoe: the share of consumption covered by RES was therefore 18.3%.
Regarding the electricity sector, in 2017, approximately 35% of gross national production originated from RES; the renewable source that made the greatest contribution to electricity production in 2017 was hydropower (35% of overall electricity production from RES), followed by solar power (23%), bioenergy (19%), wind power (17%) and geothermal power (6%).
According to the monitoring report on the achievement of the targets drafted by the GSE on July 2020, in 2018, the ratio was 17,8%, with a slight flection from 2017, explained by: (i) the reduction of consumption for heating; (ii) the decreased production from photovoltaic plants; (iii) the increase of fossil fuels (oil and gas).
In 2019, the new installations amounted to 1.19 GW of power (+10% than 2018).
In December 2019, it is possible to notice an important increase in photovoltaic installation, also due to the national incentive plan that was introduced. The increase regards both the number of operations (+24%) and the power installed (+38%).
Italy is now becoming aware of the contributions of large scale power plants (+ 1 MW), which was very important news throughout 2019 (230 MW of large utility scale implants).
The consolidation process is taking place differently in the various sectors. With regards to wind power, the top 10 players hold 58% of the installed power in Italy.
Photovoltaics are more fragmented, but the gap between the various players is even more marked, with the leader holding 19% of the power. The share of the top ten companies grew by three percentage points, reaching 51% of utility scale power in 2019, equal to 2.3 GW[2].
As for the new 2030 targets, it must be taken into consideration that currently, the total amount of renewable energy installed in Italy amounts to 55 GW. Which means that an average of 4 GW per year should be installed to reach the target of 95 GW set forth by the Plan.
- THE COVID EFFECT
The pandemic had a twofold effect on the sector, impacting both the electricity demand and the procedures regarding the attribution of the national feed-in tariffs.
The Monthly Electrical System Report, published by TERNA for the month of March highlighted a gradual decrease in electricity demand, which was 10.8% lower than the same month of 2019 (decrease mainly concentrated in the North).
Also, article 103 of Legislative Decree n. 18 of 17 March 2020 suspended the administrative procedures regarding the authorizations, in order to avoid responsibilities connected to the violation of the binding terms of completion of the procedures.
This stall probably affected the access to incentives provided by DM 4 July 2019. In fact, the suspension of terms may have produced the impossibility to obtain the permits in time for the subscription to the third phase of the procedure, which went almost deserted (2/3 of the capacity was not allocated).
This will require further implementation in the instruments adopted by the Government to achieve the renewable energy objectives.
- NORMATIVE NEWS
Some recent normative interventions from the national legislator and government are particularly relevant for the renewable energy market, in terms of both investments and simplification of administrative procedures. In particular:
- Legislative decree n. 76/2020 (“Decreto Semplificazioni”) set forth the following relevant provisions:
- simplifications for the authorization procedures for renewable energy plants:
- in case of modification, refurbishment, rebuilding, reactivation of existing RE plants, the environmental impact assessment must only regard the already introduced modification;
- some changes on existing plants, which don’t increment occupied land, and additional works can be authorized by a sworn declaration. Said interventions do not have to go under environmental impact assessment or be authorized in other ways;
- simplifications are introduced to the authorization procedures for energy storage systems;
- acceleration measures are introduced until 31 December 2021 to expedite the times of the procedures involving multiple authorities;
- Simplifications are introduced for the screening and scoping related to the environmental impact assessment procedure;
- the timing of the single authorization for the plants are reduced from 120 to 90 days;
- Two exceptions are introduced, also allowing photovoltaic plants in agricultural areas to participate in the competition for the feed in tariff provided by the FER-1 decree:
- plants realized in sites of national interests;
- plants to be realized on dismissed landfill sites and exhausted quarries.
A preference in the selection of the projects is introduced for plants realized with substitutions and removal of asbestos;
- The energy performance contract is described as a form of public private partnership.
- The Budget Law for 2020 (Law n. 160 of 27 December 2019) sets forth State warranties for the development of projects consistent with the green new deal:
- a fund of 470 million euros for each of the years 2022 and 2023 is established.
- warranties are assumed by SACE S.p.A., which manages the procedure and instructs the practice. Sace directly awards warranties within the limit of 250 million euros. Above that threshold, the company will need to receive the authorization of the Ministry of Economic Development
- Draft of guidelines for the expenditure of the Recovery Fund resources.
- Among the proposals of the document, there are some actions to implement the Integrated National Plan on energy and Climate, such as:
- the amelioration and modernization of the electric grid to manage the increase of diffusion,
- the conversion of the 1200 existing biogas-fuelled plants in methane production.
[1] In this regard, the European Commission meaningfully affirmed that “A power sector must be developed that is based largely on renewable sources, complemented by the rapid phasing out of coal and decarbonising gas”. It is also affirmed, “The clean energy transition should involve and benefit consumers. Renewable energy sources will have an essential role. (…) The smart integration of renewables, energy efficiency and other sustainable solutions across sectors will help to achieve decarbonisation at the lowest possible cost. The rapid decrease in the cost of renewables, combined with improved design of support policies, has already reduced the impact on households’ energy bills of renewables deployment. The Commission will present by mid-2020 measures to help achieve smart integration”.
[2] Althesys, IREX Annual Report 2020