Hydropower, Project Development, Wind Power

Up in the air: A review of the Italian wind market

Issue 4 and Volume 10.

As the fourth largest wind market in Europe, Italy is experiencing strong growth, installing over 400 MW of new capacity in 2006. But can the good times last? A combination of strong local opposition, coupled with a complex planning regime, could put the brakes on an otherwise dynamic market. Alasdair Cameron looks at some of the issues.

In 2006, Italy installed 417 MW of new wind capacity, pushing it through the 2000 MW barrier and bringing total installed capacity to 2123 MW. While this was slightly less than the new capacity installed in 2005, it still represented steady cumulative growth of 24%, and prospects (in some areas at least) are looking excellent for the future. By 2008, the Italian Wind Energy Association estimates that the country could be installing over 1000 MW per year, and will easily beat the target of 2500 MW by 2012 laid down by the national government. Indeed, according to Gianni Silvestri, Adviser to the Italian Ministry of Industry, by the end of 2007, Italy will have over 2800 MW installed, passing the target five years early.


Installing a small turbine in Italy BLU MINI POWER

However, this growth is uneven, with just three provinces (Puglia, Sicilia and Campania) accounting for more than 50% of the total installed capacity. Elsewhere, progress has been slower, with some areas – such as Sardinia – actually halting wind power development in favour of new coal generation. While these issues will be discussed in further detail later on, it is important to recognize the regionality of the Italian wind business, in addition to the national policies which affect it. Italy has huge potential as a growth market for wind, but there are some serious concerns for the future of the industry, and care must be taken by developers to ensure that the situation is not made worse by poor planning.

Government support

Like the UK and many US states, Italy primarily uses a Green Certificate system to support the development of wind power and other renewables. The certificate system replaced an old feed-in tariff support mechanism which was phased out in 1999 (it was not a fixed feed-in but was highly variable depending on many factors). Under the new system, electricity suppliers are obliged to source an increasing proportion of their energy from renewable resources (in 2007, this stands at 3.05%) and must do this through the purchase of Green Certificates or ‘Green Tags’. Thus, in addition to generating income through the sale of electricity, wind farm operators can also sell the certificates associated with that electricity. Due to the current shortage of renewable energy in the Italian market, Green Tags are now selling for around €125/MWh, providing a strong stimulus for market growth. The economic rational for wind developers is therefore in place, and concerns are now focused on ensuring the long-term stability of the programme and in planning and consenting issues.


A 1.3 MW turbine being tested in northern Italy LEITNER

Alongside the green certificates, the Italian government is planning to introduce a new feed-in tariff for small wind plants (<1 MW), which developers could choose to take advantage of instead of the certificates. The small wind tariff is likely to be around €0.22/kWh and is proving successful in stimulating the establishment of a number of small wind turbine manufacturers. For large wind, it is unclear if a new feed-in tariff will be unveiled, but the introduction of separate feed-in tariffs alongside the green certificate system is in keeping with the recent introduction of a feed-in mechanism for photovoltaics, designed to give that market an additional push.

Turbine manufacturers operating in Italy

The recent steady growth of the Italian market has encouraged a number of international turbine manufacturers to locate and expand operations there. Vestas Italia, set up in 2000, currently produces around 440 MW of turbines per year, around 60% of which are exported to China. This has given Vestas a reasonably strong position in the Italian market, where it currently accounts for around 23% of total yearly installations. Although it currently has no local manufacturing facilities, Gamesa has also made substantial inroads into the Italian market and has now overtaken Vestas to become the dominant player with a 64% market share. Indeed, Gamesa recently announced that it had signed a deal with the utility ENEL to supply around 200 turbines, totalling 163 MW, over the period 2007-2009, helping to ensure that it remains the dominant supplier in the near future.

The only indigenous producer of large turbines, Leitner, is currently working on its 1.2 MW and 1.35 MW direct-drive machines, several of which have been installed in the Tyrol region of northern Italy. Plans are under way to expand to begin series production of these turbines in the near future.

In response to the announced feed-in tariff for wind turbines of less than 20 kW, a number of small wind turbine manufacturers have been set up in Italy. One of these – Blu Mini Power – is based in Milan, with factories in Tuscany. It currently manufactures and sells small wind turbines with a capacity of between 1 kW and 5 kW. It only began commercial operations in 2006 and is looking to expand into the regions of Puglia, Campania and Tuscany.

As well as more recent entrants to the small wind market, Italy is home to Ropatec, a leading brand of small wind turbines for off-grid use. Ropatec’s characteristic vertical axis turbines have been deployed worldwide in demanding locations and are available in capacities of up to 6 kW.

Developers

Until recently, the Italian wind market was largely dominated by the Italian Vento Power Corporation (IVPC), now owned by Irish company Trinergy. Although in recent years IVPC has seen its market share slip as new companies have entered and the sector matured, it still remains a dominant player, with 31% of the Italian market.

Among the most high profile of the new wind power developers in Italy is ENEL, one of the country’s largest electricity utilities. Counting large hydro, ENEL has around 20,000 MW of renewables worldwide, including at least 600 MW of wind power. Altogether, renewables account for 29% of the company’s generation portfolio. In Italy itself, the company operates 309 MW of wind and is looking to expand. Speaking at the EWEC conference, Luigi la Pegna of ENEL said that the company would be investing €4 billion in renewables over the next five years, consisting of 1500 MW of wind, 100 MW of hydro and 1000 MW of geothermal. Of this €4 billion, €1.6 billion will be spent on renewables in Italy, representing something like 1500 MW of new wind. Interestingly, Mr la Pegna also confirmed ENEL’s commitment to offshore, saying: ‘Offshore is the frontier. Everybody is talking about offshore in Northern Europe. We are committed to install the first offshore wind in Italy.’ If successful, this would be the first offshore wind farm in the Mediterranean and would open up an exciting new frontier in European wind.


Ropatec’s vertical axis small turbine is available in capacities of up to 6 kW ROPATEC

Other major companies which are beginning to play a role in the Italian wind market include Spanish utility Endesa and the investment firm Alerion, which recently bought 392 MW of existing wind farms. In addition, a host of smaller developers have sprung up, including companies like Inergia, which was founded in 2003 and which aims to develop a wide portfolio of renewable generation, including wind. In particular, Inergia is interested in generating electricity from distributed sources, such as photovoltaics and small wind turbines.

Local opposition

Although at first glance things look good for Italian wind, at a local and regional level there are serious concerns that opposition to the development of wind farms could damage the entire sector. Speaker after speaker at EWEC in Milan voiced their concerns for the future of the Italian wind industry, citing huge opposition in certain local newspapers and the decision by some districts such as Sardinia and Sicily to halt development all together.

‘I am very worried about the way that wind energy is being discussed in Italy. Italy is the country where the anti-wind organizations are most successful.’ These were the words of Fabrizio Fabbri, Head of Technical Secretariat, Ministry of Environment, as he described the current state of the industry. Although some of the negative feeling came from irrational opposition, Mr Fabbri admitted that mistakes had been made by the industry, particularly in the early days: ‘The first wind farms were developed unsuccessfully, badly placed, badly planned. This caused a reaction from the public. For the mistakes of the few, the entire industry must pay.’

These sentiments were echoed by Gianni Silvestrini, who admitted that the situation in many parts of the country was difficult: ‘Some regions have a neutral approach, some have a negative approach.’


The growing market and high prices for green certificates has encouraged new developers to enter the Italian wind market ASJA

Along with local opposition, some regions have complex bureaucracy and convoluted planning regulations. As an example, Luigi la Pegna of ENEL cited a case where it took 16 months simply to get permission to change the turbine on an existing wind farm, despite the fact that there would be no new visual impact. Such delays are extremely costly and frustrating for the industry and can lead to developers choosing to invest in less difficult markets.

Part of the problem is that to date the national government has not set down clear guidelines for local governments to deal with planning applications for wind turbines. This has led to confusion and allowed each region to develop its own set of rules and licensing procedures.

However, the news is not all bad. While some provinces are indeed set against new wind, others, such as Puglia, have authorized more than 800 MW of development, 480 MW of which could be in place by the end of 2007. Furthermore, the recently elected government of Romano Prodi has indicated a commitment to renewables, and there are hopes that this could lead to a more coherent national policy.

Some wind supporters have also recognized that increased efforts must be made by the industry to convince its detractors. Fabrizio Fabbri: ‘An effort is required to ensure we are engaging with the local populations and sharing with them more of the benefits.’ Other developers agreed but also said that wind developers should not be afraid of arguing their case. Luigi la Pegna: ‘We need to send a message to the opposition that the wind farm can give us a better world in the end.’

Alasdair Cameron is former Assistant Editor of Renewable Energy World
e-mail: [email protected]