ITALIAN ENERGY TRANSITION: Proposal for a National Plan for Energy and Climate

CURRENT SITUATION

For a long time Italy has pursued the widest use of tools that improve together energy security, environmental protection and access to energy costs, contributing to the European objectives on energy and the environment.

The Ministry of Economic Development, the Ministry of the Environment, the Ministry of Infrastructures and Transport and the Ministry of Economy and Finance are proposing energy plans that seek to consider the potential benefits inherent in the wide diffusion of renewables and energy efficiency, related to the reduction of polluting emissions, the improvement of energy security and economic opportunities for the production system.

These three Ministries intend to continue with conviction on this path, with an approach that increasingly puts the citizen at the center, also in the capacity of prosumer, and companies, in particular medium and small. This evolution is facilitated by the constant attention on the efficiency and cost reduction of some renewable technologies, among which the photovoltaic will become increasingly important.

With the Decree of the Minister of Economic Development and the Minister of the Environment and of the Protection of the Territory and Sea, the new National Energy Strategy (SEN) was adopted on 10 November 2017, which constitutive not a point of arrival, but a starting point for the preparation of the integrated plan for energy and climate (PNEC), useful for the basic technical investigation and for the consultation carried out.

NATIONAL ENERGY STRATEGY

As part of the new National Energy Strategy, the country set itself the goal of the phase out of coal by 2025, aiming to expand the share of renewable energy in final energy consumption to 28% by 2030.

The main objectives of the SEN 2030 National Energy Strategy are:

• Adjust gas prices with European ones,
• contain the energy expenditure of families and businesses,
• zero the use of coal,
• increase energy efficiency in the residential and transport sectors.

Competitiveness, safety and the environment are the three drivers of the provision that contains only the scope, delegating the various implementation tools to subsequent laws and regulations.

INTEGRATED NATIONAL PLAN FOR ENERGY AND CLIMATE (PNIEC)

As required by the Regulation of the European Parliament and of the Council 2016/0375 on the governance of the Energy Union, Italy had time until 31 December 2018 to deposit our ten-year strategy on energy efficiency and environmental sustainability.

This strategy is developed on five parallel levels: decarbonisation, energy efficiency, energy security, internal energy market and research/innovation and competitiveness.

Main objectives of the integrated National Plan for Energy and Climate:

• a percentage of energy production from RES (Renewable Energy Sources) in the GFEC (Gross Final Energy Consumption) equal to 30%, in line with the objectives set for Italy by the EU;
• a share of RES energy in the GFEC of 21.6% compared to the 14% forecast by the EU;
• a reduction in primary energy consumption compared to PRIMES 2007 scenario of 43% (EU target: 32.5%);
• the reduction of GHG vs 2005 for all non-ETS sectors of 33%, a 3% higher target than EU

ECONOMIC PROBLEMS

The cost of energy (gas, fuel and electricity) paid by companies often shows a positive spread compared to the European average (especially for SMEs), and this is another reason for a very careful approach to the costs of the energy transition.

In general, for the electricity sector, the price gap compared to the European average remains, even if in decline. The cause of this difference must be search in:

– higher wholesale energy price, due to:

• gas price (main and marginal source for Italy) even higher than the European average;
• energy mix strongly moved towards gas combined cycle plants (high variable costs)
• growth of costs for network services

– high system charges, especially for policies to support renewables and energy efficiency.

So, the objective set is to contain all the items that contribute to determining this price disadvantage and the impact of the charges for the growth of renewable sources on consumers, so as to protect their purchasing power and the competitiveness of SMEs. energy-intensive industrial sectors, preventing the risks of relocation and protecting jobs.

The measures that the Government, in coordination with ARERA (Italian Energy Regulation Authority), intends to promote are aimed on the one hand for the development of consumer competence and its confidence in the opportunity to appropriate the opportunities and benefits of the market, and on the other effective conditions of competition among providers. The achievement of the decarbonisation objectives of the Energy and Climate Plan (PNEC scenario) requires a significant commitment in terms of incremental investments compared to the current policies scenario. With reference to the entire national energy system, it is estimated that, over the period 2017-2030, more than € 180 billion of additional investments will be required combined with the current policies scenario (equal to an increase of 18% in the period considered).

OBJECTIVES IN ENERGY MARKETS

ELECTRICITY

The national objectives in the field of energy security for the electricity sector are divided into infrastructural objectives, aimed at increasing the security of supply in the various expected conditions and objectives of a managerial / organizational nature.

Main objectives for electricity:

➢ Long-term contracts (PPA)

To promote the use of this instrument extensively, a reference nomenclature will be created, to define the possible types of PPA and the relative minimum elements for the stipulation of contracts,

➢ Regional burden sharing

Sharing the national objective through a division of the same among the Regions 

➢ Revamping and repowering

GAS

In the gas sector, the main objective is to ensure an overall system that is more secure, flexible and resilient, able to cope with a market environment that is tending to be more uncertain and volatile, and to support the strong development of non-programmable renewable sources, guaranteeing coverage of energy demand, especially in relation to the peaks of uncertainties with low levels of production of renewable sources.

These objectives can be achieved by:

• increasing the diversification of supply sources, by optimizing the use of existing infrastructures and the development of the LNG market;
• the improvement of the flexibility of the national system with respect to the sources of supply, through the modernization of the gas transport network
• improvement of the safety margin in the event of high demand peaks;
• coordination of national emergency plans with those of other countries that are connected to the same physical supply corridors

CONSEQUENCES?

The opportunity to become a European reference point is at hand. 10% of the EU’s annual turnover in the renewable energy sector is generated by Italy, the second largest producer in Europe with significantly higher shares for biogas and heat pumps. To complete the picture of the situation we recall that Italy holds the fifth largest solar photovoltaic capacity in the world and is a recognized leader in the production of geothermal energy and in renewable cogeneration systems. The limited presence of thermoelectric power plants with consumption of fossil fuels will facilitate decarbonisation, we will see if the security of supply will go hand in hand despite the expected increase in renewable energy.It remains to be seen whether it will be possible to involve SMEs in the best possible way, for which a system of incentives or access to finance must be established to ensure that the evolution of production goes hand in hand with energy evolution.

Federico Talato | Energy Consultant