Italy’s auction scheme to drive renewable energy installations

GlobalData Energy 13 February 2020 (Last Updated February 13th, 2020 09:24)

Italy’s auction scheme to drive renewable energy installations

Italy has approved a new auction scheme, which is set to encourage renewable energy installations in the country.

Plants with a capacity from 1MW can access the incentives through the auction scheme. As part of the scheme, seven bidding rounds will be held until 2021 with approximately 4.8GW of renewable energy capacity to be contracted. The auction scheme has different categories depending on the technology type.

Category-A is for wind and solar photovoltaic power (PV) plants, Category-B is for hydroelectric and gas-based plants, while Category-C is for wind, hydroelectric and gas plants subject to partial or total revamping. For Category-A, the first two procurement rounds will each achieve approximately 500MW of allocated capacity. The next three rounds will have an allocated capacity of 700MW each and the final two will have a contracted capacity of 800MW each.

The first round of auction for Category-A was conducted and the winners were announced in January. Out of 500MW, commercial-scale wind farms totalling 495MW and a single solar plant of 5MW secured the financial support.

The auction was open for plants with a capacity of over 1MW and excluded agricultural land making development projects to organise it in unused surfaces in urban or industrial areas. The reference price was set at €70/MWh with developers having an option to bid with reductions between 2% and 70% on the reference price.

Eighteen projects with prices between €48.65/MWh and €66.50/MWh were successful in the auction. The solar PV plant selected during the auction was proposed by Solar Italy IX and is planned to be developed on the island of Sardinia. The developer submitted a bid of €50/MWh for the plant. The construction works for the awarded onshore wind plants are expected to be completed within 31 months and for solar PV within 24 months from the month of a positive outcome of the auction.

The seven rounds of auctions are the country’s first set of auctions for large-scale renewable energy projects since the closing of the FiT programme Conto Energia in 2013. According to GlobalData, at the end of 2013, the country had solar PV installations of 18.1GW. The Conto Energia program offered incentive tariffs for energy produced by PV systems over a period of 20 years and came into effect in 2005.

From 2005 to 2013, the solar PV sector recorded growth at a CAGR of 119%. Until 2004, the country’s solar PV installation reached 31MW. At the end of the Conto Energia programme in 2013, it was 18.1GW. Following the cancellation of Conto Energia with a surge in solar PV installations, the growth of the renewable energy sector remained low. The post-Conto Energia era witnessed a much lower CAGR of 2.16% with the country’s cumulative solar PV installations reaching 20.6GW at the end of 2019.

Other renewable energy technologies also experienced significant growth during the Conto Energia era. At the end of 2013, the cumulative capacity of onshore wind was at 8.5GW. When Conto Energia was still active, the growth was at 22.9%. After 2013, the growth in the wind sector started to slow down. The cumulative wind installations reached 10.8GW at the end of 2019 with the sector witnessing growth at a CAGR of 4.04% in the post-Conto Energia era.

According to the country’s National Integrated Plan for Climate and Energy 2030, it is targeting 55.4% renewable share in the electricity sector. The country has set a solar PV target of 50GW expected to be reached by the end of 2030. The target for wind power has been set for 18.4GW. To achieve the target, Italy was planning to increase renewable energy investments and introduced the Renewables Decree (RES1 Decree), which encourages renewable energy plant deployment.

The success of the first round with the auction reaching 595MW in onshore wind and PV bids for a total size of 500MW means the sector investment is increasing. The country’s plan to hold three rounds of tenders in 2020 and a further three in 2021 would definitely bring in more investments and encourage the growth of the renewable energy sector in the country post-Conto Energia.