ITALIAN PV MARKET WORKSHOP ON PV INCENTIVE PROGRAMS Rome, March 8 th 2004
THE ITALIAN PV MARKET A Young Market Net Metering permitted only since Dec. 2000 Subsidy Programme launched in 2001 Managed by Min.Env./ Regions Grants up to 75% of Investment Costs Max PV Price fixed (7,25 8,00 /W) No Installations made in 2001 First Installations in 2002 New Subsidy Programme launched in 2002
PV PLANTS INSTALLED IN ITALY 12 10 8 6 4 MWp/year Forecast 2 0 1993 1995 1997 1999 2001 2003
REASONS FOR SLOW GROWTH Limited Interest by Government & Institutions Funds for Renewable Energies diverted towards Traditional Energies Delay in Launching Funding Programmes Bureaucracy in Funding Implementation No ambitious Medium Term Plans / Goals Prejudices towards Renewable Energies Limited Support by Utility Companies Low Quality/Price Level of PV offer BUT The Scenario is Changing
CHANGE OF SCENARIO Concern towards Environment Growing Air Pollution is the Main Concern Renewable Energies are Most Wanted Willingness to Pay Higher Electricity Bill Government Approach is Changing No more Funds to Traditional Energies Strong Support by Whole Parliament to REs Specific Tariff for PV Minimum Power to be Guaranteed Feed-in Tariff expected by 3Q of 2004
Air Pollution Main Concern of Italians Air Pollution Sea Pollution Water Pollution Natural Reserves Pollution Waste Disposal Climate Changes Nuclear Energy Natural Disaster Ozone Hole Industrial Desasters 0% 10% 20% 30% 40% 50% 60% 70% 65% 14% 14% 12% 11% 10% 8% 7% 6% 4% Use of Chemicals in Agriculture Environmental Pollution Acoustic Pollution OGM Use Electromagnetic Pollution Waste of Energy Base casi:1001 4% 1% 1% 1% 1% 1% No Concern 11%
Renewable Energies Most Wanted 0% 10% 20% 30% 40% 50% 60% Solar Energy 35% 22% Wind Energy 16% 22% Hydropower 15% 13% Nuclear Energy 12% 4% Biomass 6% 6% Gas 4% 6% Coal Oil No Answer Base casi:1001 3% 4% 1% 3% 8% 1 st answer 2 nd answer
Willingness to pay Higher Bill for Green Electricity 24% 24% 19% 12% 14% 7% No increase Yes, 1 /month Yes, 5 /month Yes, 10 /month Yes, >1 0 /month No Answer
ADVANTAGES OF FEED-IN TARIFF Appropriate Tool to stimulate Industrial Investments Adequate Return on employed Capital No Financial Burden for Government No Bureacratic constraints Clear Financing Rules Easy Access to Credits / Bank System One unique set of rules for Whole Market Plant Performance becomes Driving Force Financial burden transfered * From National Budget to Electricity Tariff * Impact on Tariff much smaller than curret CIP6
Lobbying Actions of GIFI for Feed-in-Tariff GIFI Expectations presented to Ministry for Industry and for Environment and Energy Authority in 2002 EU Directive on RE requires Acknowledgement by National Parliament First Draft of Italian Bill includes PV Feed-in-Tariff Final Draft does NOT mention Feed-in-Tariff GIFI Presentation to Chamber of Deputies GIFI suggestions accepted by Parliament Feed-in-Tariff included in Final Draft of Law Law approved on Dec 29th 2003 Implementation of Directive by Ministry for Industry expected by August 15 th 2004
Main Items of New RE Law Share of Electricity from RE increased 2.35%/y from 2004 No more subisidies to Energy from Assimilabili Sources Less Bureaucracy in Government Authorizations Net Metering for any RE Plants up to 20 kw Special Tariff for PV plants which allows adequate RCE of investment costs Implementation of Directive by Ministry for Industry expected by August 15 th 2004
What does GIFI expect from the Ministerial Implementing Directive Tariff and Duration should allow fair remuneration of PV Investment and possibility of recurring to project financing. 0,60 /kwh for 20 years (better 0.95 /kwh for 10 years) What is better: One unique tariff rate for all PV or different rates depending on application? BIPV should be favoured Gradual Reduction in Coming Years 1% in 2nd Year - 5% at the end Maximum Capacity as per Italian White Book on REs 300 MW by 2008 with possibility of being increased afterwards Grid interface Requirements should be reasonable and fair No Limits on Nominal Power Status of Implementation to be Monitored by Task Force
Cash Flow Analysis - 0,6 /kwh - 20 years '000 Euro 40 30 20 10 0-10 -20-30 -40 2004 2008 2012 2016 2020 2024 2028 2032 Cash: - 36k IRR: 3,87% 2036 Size pf PV Plant Investment Cost, : Feed-In Tariff: Duration: Energy Cost: 10 kwp 69.000 +VAT 0,6 /kwh 20 years kwh/kwp/year: 1100 Efficiency Reduction: Maintenance Cost: System Lyfe: Inflation Rate: 4% 0,08 /kwh 0,5% /year 0,7% /year 30 years Loan: 40.000 Duration: Interest Rate: 6% Cumulative Cash Flow 10 years Cash Flow Present Net Value
Cash Flow Analysis - 0,6 /kwh - 20 years '000 Euro 30 20 10 0-10 -20-30 -40-50 2004 2008 2012 2016 2020 2024 2028 2032 Cash: - 37k IRR: 3, 7% 2036 Size pf PV Plant Investment Cost, : Feed-In Tariff: Duration: Energy Cost: 10 kwp 69.000 +VAT 0,6 /kwh 20 years kwh/kwp/year: 1100 Efficiency Reduction: Maintenance Cost: System Lyfe: Inflation Rate: 4% 0,08 /kwh 0,5% /year 0,7% /year 30 years Loan: 60.000 Duration: Interest Rate: 6% Cumulative Cash Flow 10 years Cash Flow Present Net Value
Cash Flow Analysis - 0,95-10 years '000 Euro 20 15 10 5 0-5 -10-15 -20-25 -30-35 2004 2008 2012 2016 2020 2024 2028 2032 2036 Cash - 36k IRR: 5,13% Size of PV Plant 10 kwp Investment Cost, : 69.000 +VAT Feed-In Tariff: 0,95 /kwh Duration: 10 years Energy Cost: 0,08 /kwh kwh/kwp/year: 1100 Efficiency Reduction: 0,5% /year Maintenance Cost: 0,7% /year System Lyfe: 30 years Inflation Rate: 4% Loan: 40.000 Duration: 10 years Cumulative Cash Flow Interest Rate: 6% Cash Flow Present Net Value
Cash Flow Analysis - 0,95-10 years '000 Euro 10 5 0-5 -10-15 -20 2004 2008 2012 2016 2020 2024 2028 2032 2036 Cash - 16k IRR: 4,35% Size of PV Plant 10 kwp Investment Cost, : 69.000 +VAT Feed-In Tariff: 0,95 /kwh Duration: 10 years Energy Cost: 0,08 /kwh kwh/kwp/year: 1100 Efficiency Reduction: 0,5% /year Maintenance Cost: 0,7% /year System Lyfe: 30 years Inflation Rate: 4% Loan: 60.000 Duration: 10 years Cumulative Cash Flow Interest Rate: 6% Cash Flow Present Net Value
Impact on tariff: 0,6 for 20 years and 0,95 for 10 years 0.0005000 0.0004500 0.0004000 0.0003500 0.0003000 0.0002500 0.0002000 0.0001500 0.0001000 0.0000500 0.0000000 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 Eur/ kwh Lit 0,73/kWh 0,60 for 20 years 0,95 for 10 years
Resources Needed to Finance Feed-In Tariff Much Lower than CIP6 Natural Reduction 700 600 500 400 300 200 PV Feed-In Tariff CIP 6 100 0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Milions of Euro
400.000,00 Economics 300.000,00 200.000,00 100.000,00 0,00 Anno -100.000,001-200.000,00-300.000,00-400.000,00 Anno 3 Anno 5 Anno 7 Anno 9 Anno 11 Anno 13 60% Subsidy on Investment Feed-In Tafiff 0,6 Feed-In Tariff 0.9 Anno 15 Anno 17 Anno 19 Anno 21 Anno Anno 23 25
STRENGHT OF ITALIAN PV MARKET High Level of Solar radiation Large Population Need of meeting White Paper Targets Consumers and SME s wish to get engaged and to act in favour of environment / climate
Solar radiation in Italy, kwh/m 2 /year 200 180 160 140 120 100 80 60 40 20 0 ITALIA GIAPPONE GERMANIA kwh/m2/year
FEED-IN TARIFF DRIVING FORCE FOR FUTURE OF PV IN ITALY-(1) Opportunities Generated by PV Environment Minded Technology Innovation/Industrial investment Direct & Indirect Manpower Increase 1500 More Employed in 1st year Economic Development in Italy s Sunny South Growth of Export Focal Point vs. Mediterranean Market Dependence from Oil imports Reduced on medium terms/diversification of Energy Sources
PV = INVESTMENT in the FUTURE (2) PV will play a fundamental role for Italian economy in 2020 GIFI is ready to play his role in this game Cooperation of all involved Actors mandatory National & Local Governments PV Operators Industries Building Association» so Future of PV depends on us IT IS NOW TIME TO TAKE ACTION