High prices paid for wind energy have continued to draw both local and foreign developers into the market and an amended incentive structure introduced in December with the 2008 national budget has done nothing to harm the buoyant market. "The new system is more stable because they've lengthened the life of green certificates to fifteen years and provided greater certainty in terms of the rules," says Paolo Montanari of wind consultancy MX Matrix. The previous period was 12 years. At worst, Montanari expects Italy to at least match the 600-odd megawatts installed last year.
The new incentive structure continues to include a reference price for wind power purchases, now EUR 0.18/kWh, which is achieved through two revenue streams, one from sale of electricity and the other from sale of green certificates. A certificate is awarded for every kWh produced. The price is slightly lower than the roughly EUR 0.20/kWh producers had most recently been receiving, but remains high compared to other countries.
The decline in price is also compensated for by greater long term security. Italy, struggling to meet its renewable energy obligations, has raised the annual hike in the percentage of green power that electricity retailers are legally required to include in their sales by 0.75 percentage points from a previous 0.35 percentage points. This means retailers will have to acquire 3.8% of their electricity from renewable sources in 2007 and 7.55% in 2012.
A firm hand
As much as the firmer market structure, it is also the government's new-found determination to clear away market barriers that lies behind the industry's optimism. Some of Italy's regional governments have set up notable obstacles to wind farm development. Now they are being told they must play their part in reaching national commitments. Legislation to establish regional energy targets and other measures to promote renewable energy has been promised. There are fears, however, that it could be placed on the backburner in the wake of a government crisis early in 2008. Elections are slated for mid-April.
Meanwhile, national guidelines for wind plant siting have yet to be approved, though they were called for in a 2003 law on renewable energy. Many developers continue to complain about unnecessarily complicated regional rules, which often change significantly from region to region. Nonetheless, Montanari notes that a number of regions, including regional wind power leader Apulia, have begun taking steps to simplify procedures.
Apulia installed the largest volume of new wind capacity during 2007, adding 217 MW to bring its cumulative total to about 677 MW. It was followed by Sicily, which saw 133 MW of turbines go in the ground. Both regions are expected to be among those leading the way in 2008, along with Campania and Calabria. Calabria has seen a significant acceleration in development since a single 6 MW wind farm began operating in 2006.
The players
In the wind turbine supplier ranking, Denmark's Vestas regained the lead role in Italy in 2007, providing nearly half of all capacity installed. Gamesa slipped back to second place, with about 143.5 MW to its name. A smaller Spanish company, Ecotècnia, owned by French engineering conglomerate Alstom since July, saw its first turbines turning on Italian projects in 2007, with two wind farms totalling 16.7 MW.
This year is expected to be a particularly strong one for another newcomer, German wind turbine supplier Nordex, whose first turbines in Italy also appeared last year. It supplied technology to Sardinia for a 21 MW wind farm owned by Greentech, a company traded on the Copenhagen stock exchange. Nordex, originally Danish, has succeeded in securing significant Italian business -- and not only from Greentech, which counts a founder of Nordex among its founding owners. Of the 288 MW Nordex is installing in Italy this year in five projects, two are for Greentech and the re maining three are for Erg, Co-ver Energia and Falck Renewables. The Sardinia wind plant is also Greentech's first operational Italian wind farm, but with more than 1000 MW in the pipeline, the company is also expected to be one of the major project developers in 2008 and beyond.
Last year, however, it was home grown Endesa Italia that added the greatest number of wind megawatts, expanding its portfolio with a combined total of 123.75 MW. German utility E.ON is expected to take over Endesa Italia soon, and thus break into Italy's wind market. Endesa Italia was one of the consolation prizes E.ON received when its takeover offer for Spanish utility Endesa was topped by a joint bid from Italy's Enel and Spain's Acciona. The newcomers, however, still have a long way to go to catch up with the doyen of Italy's wind project developers, Italian Vento Power Corporation. It retained its role as the leading wind producer in Italy and is still active as 2008 gets underway.
Bigger
The first 3 MW turbines in Italy were installed in two projects that began operating last year: a 72 MW plant owned by German investor Allianz in Sicily and a 36 MW plant developed by Italy's Fri-el in Campania. As well as bigger turbines, Montanari says another trend to watch is the likely rise of single-turbine installations sponsored by Italian entrepreneurs. They are expected to take advantage of a streamlining in the permit processing for smaller projects, also introduced with the budget law. Previously, small projects underwent the same expansive authorisation process as large developments.
On the technology front, a new wind turbine make is waiting in the wings. Bolzano-based Leitwind says it has just begun to install a handful of its 1.5 MW turbine in projects in Austria and Bulgaria. In January, the company also sealed a joint venture with Indian firm Shriram to produce some of its turbines there.
Offshore
Italy has no offshore wind capacity although a handful of companies have projects in the works. The 2008 budget also introduced a bare-bone framework for offshore investments, but market players generally believe that purchase prices foreseen for offshore wind power is insufficient to kick-start a market: offshore generation would be awarded only a slightly higher number of green certificates, 1.1 per unit, than generation from onshore plant. Nonetheless, the government is counting on offshore wind power supplying an important slice of future needs. The Italian government, in a position paper presented to the European Commission in the autumn, estimated that some 2000 MW of offshore capacity could be installed by 2020, a decent slice of its maximum theoretical capacity for Italian wind power in that year of 12,000 MW.
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