Critical assessment of support for the evolution of photovoltaics and feed-in tariff(s) in Italy

Sustainable Energy Technologies and Assessments 9 (2015) 95–104

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Original Research Article

Critical assessment of support for the evolution of photovoltaics and feed-in tariff(s) in Italy V. Di Dio a, S. Favuzza a,⇑, D. La Cascia b, F. Massaro a, G. Zizzo a a b

DEIM – Dipartimento di energia, ingegneria dell’Informazione e modelli Matematici – Università di Palermo, Viale delle Scienze, Palermo, Italy DICGIM – Dipartimento di Ingegneria Chimica, Gestionale, Informatica, Meccanica – Università di Palermo, Viale delle Scienze, Palermo, Italy

a r t i c l e

i n f o

Article history: Received 13 June 2014 Revised 24 November 2014 Accepted 8 December 2014

Keywords: Feed-in tariff(s) Incentive measures PV systems

a b s t r a c t The feed-in tariff(s) mechanism involves an obligation on the part of an electricity provider to purchase electricity generated by renewable energy sources in its relevant area, paying a tariff determined by public authorities and guaranteed for a specific time period. Feed-in tariff(s) have been the primary mechanism used for supporting the development of renewable energy sources in the EU and, up to date, they are being applied in 20 EU Member Countries. On 6 July 2013, the Italian experience with feed-in tariff(s) for photovoltaic systems finished. During its lifetime of eight years, this incentive mechanism, named ‘‘Conto Energia’’, was characterized by periods of great success followed by others of serious skepticism. The implementation of the Italian feed-in tariff(s) mechanism was changed many times, becoming very close to the European standard. Ó 2014 Elsevier Ltd. All rights reserved.

Introduction The crisis of traditional fossil fuels (coal, petroleum, and natural gas), the ongoing climatic changes, and the consequently increasing attention towards environmental issues require new and urgent energy incentive policies able to turn the present European energy system, on which our society is based, into a more environmentally and economically sustainable one. The recourse to Renewable Energy Sources (RESs) to satisfy a significant part of the European Union (EU) energy needs is considered an essential instrument, because these sources can contribute not only to the reduction of climatic changes but also to the diversification of primary energy sources, important industrial growth, and increase in employment [12,13,36]. Therefore, the issues of energy-efficient technologies are the core of the most recent energy policies of the EU, based on the acceptance of the cooperation strategies between the EU Member Countries aimed at diversification of energy sources, energy efficiency improvements, and Greenhouse Gas (GHG) emissions reduction [54]. Considering the EU targets for the year 2020 (20% reduction of GHG emissions and 20% increase in electricity produced from RESs), the easiest way to attain these goals is through a relevant increase in Distributed Generation (DG) within the electrical power ⇑ Corresponding author. E-mail address: [email protected] (S. Favuzza). http://dx.doi.org/10.1016/j.seta.2014.12.004 2213-1388/Ó 2014 Elsevier Ltd. All rights reserved.

distribution systems, thus allowing the exploitation of several RESs. Among the various technologies based on RESs, photovoltaics (PV) attracts considerable attention today due to its potential to make an important contribution to renewable energy production in the near future [34,60,17,7,46,32,10,11,18]. In 2012, indeed, PV industry production increased by almost 40% and reached a worldwide output of about 40 GWp of PV modules [48]. Yearly growth rates over the last decade were on average between 40% and 90%, which make the PV industry the fastest growing one today. This is basically due to the following cornerstones: Solar radiation is a free and inexhaustible source of energy; There is no need for expensive maintenance; There are no noise emissions; Integration in buildings does not present the typical environmental impact of other ‘‘green’’ technologies (for example wind turbines);  In the last five years, there has been a decrement of residential PV electricity system costs of almost 60% in the most competitive markets, so the cost of PV-generated electricity is already cheaper than residential electricity retail prices [52];  PV plants allow the environmental costs associated with CO2 emissions to be reduced.    

In the coming years, the development of PV plants will increase thanks to the above cornerstones, incentive policies, and, most

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importantly, the decreasing costs and improved efficiencies of PV modules [60]. As early as 2008, during the greatest PV diffusion period, some scientists advocated for the reduction of tariffs granted for solar-based electricity. In Germany, for instance, the large feed-in tariff(s) (FITs) guaranteed for solar electricity constituted a subsidization regime that, if extended to 2020, threatened to reach a level comparable to that of German hard coal production [41]. Basically, incentive policies are promoted by national governments and encouraged by the EU, which is striving to ensure the PV industry remains competitive on the worldwide market. The most common incentive mechanism in Europe is the FITs. This mechanism obligates an electricity provider to purchase electricity generated by renewable energy producers in its relevant area, paying a tariff determined by public authorities and guaranteed for a specific time period. Up to today, the FIT mechanism is being applied in 20 EU Member Countries and in 63 countries worldwide [31]. In Italy, the FIT mechanism has been named ‘‘Conto Energia’’ and has been changed five times from 2005 to 2012, becoming, at the end, very close to the European standard. On 6 July 2013, the €6.7 billion ceiling of the Conto Energia was reached with 18.2 GW of installed power and the Conto Energia ceased after 30 days 5 August 2013. The purpose of this work is to provide a critical analysis of the evolution of the FIT mechanism in Italy from its beginning in 2005 to its conclusion on 6 July 2013. In particular, this work examines the five versions of the Conto Energia, analysing for each one both the advantages and the critical issues and commenting on its influence on the development of the PV market in Italy. Moreover a short comparison with the implementation of the FIT mechanism in the main EU countries is provided. Finally, it is shown that the high complexity of the Italian technical standards and bureaucratic processes have made the Italian incentive mechanism very difficult to be implemented by users and technicians.

Worldwide strategies for supporting PV systems In the last decade, several incentive policies for PV systems have been carried out: capital subsidies, VAT reduction, tax credits, green tags, net-metering, FITs, and so on. The experience has demonstrated that, depending on the different forms of its implementation, each incentive mechanism can lead to advantages but also disadvantages for the electricity producers and the community. Some studies [51,58] have proposed simple microeconomic models for comparing these mechanisms with respect to social welfare. Fouquet and Johansson [39] and Sarasa-Maestro et al. [56] reported two interesting discussions on the incentive policies for PV system remuneration in EU countries, explaining how support policies for PV systems have evolved in these last years. Dusonchet and Telaretti [29,30] performed a comparative economic analysis of each individual European incentive mechanism for PV systems based on the calculation of the Net Present Value (NPV), the Discounted Cash Flows (DCFs), and the Internal Rate of Return (IRR). The effects of capital subsidies on the PV market in Europe have been discussed since 2000 [43,33] and most recently by Dusonchet and Telaretti [29,30]. FITs and net-metering are the most commonly used support strategies, as discussed by Campoccia et al. [4,5,6], Zahedi [59], and Antonelli and Desideri [3]. Net-metering is a simple standardized protocol for the exchange of the electricity produced by local RES-based generators belonging to residential customers. With net-metering, customers

can offset their electricity consumption with small-scale RES over a whole billing period, using the electricity at a different time to when it is produced, without considering when the power is consumed or generated, and storing their energy in the electricity provider grid. Providers may benefit from this support mechanism because, when customers are producing electricity during peak periods, the system load factor is increased. Net-metering is a widespread mechanism for supporting PV systems especially in the US [16] and since the end of the last Conto Energia it is the preferred support mechanism for small-sized PV systems in Italy. At present, from 1 January 2013 to 31 December 2014, PV systems installed on residential buildings and connected to the LV grid with a net-metering contract can benefit from a tax credit of 50% of the total purchase, installation, and design cost and a VAT reduction of 10–22% (design cost excluded). The FIT mechanism involves the obligation on the part of an electricity provider to purchase electricity generated by RES in its service area, paying a tariff determined by a public authority and guaranteed for a specific time period (generally 20–25 years). A FIT’s value represents the full price that a producer receives for any kilowatt hour of electricity generated and may include a premium above or in addition to the market price; it excludes tax rebates or other production subsidies paid by the government. Different tariffs are defined for different renewable technologies across countries depending on resource conditions (e.g. solar irradiation, wind availability, etc.) and socio-political situations. The amount of an FIT is determined so as to guarantee the cost-effective operation of RES plants. At present, the FIT mechanism is being applied in 20 EU Member Countries and in 63 countries worldwide [52]. Couture and Gagnon [14] have shown that these different ways of structuring FIT policies can have important impacts on the RES market. The following countries are those that have obtained the best results in PV promotion in the last few years thanks to FIT policy. In France, FITs for PV systems are composed of a basic tariff and may be increased by a premium. They are accompanied by other financial incentives such as a tax credit for individuals or reduced VAT and accelerated investment depreciation for companies [40]. The structure of the French PV FIT policy, presenting a basic tariff and a premium, is very similar to the Fifth Conto Energia. Moreover, in both Italy and France, a reduced VAT is allowed for the purchase and installation of PV systems. In Germany, the FIT mechanism is also very similar to the Fifth Conto Energia. Moreover, as an alternative to receiving the FIT, a producer can sell its electricity directly to a third party by a supply agreement or on the stock market and claim a market premium from the local electricity provider. The market premium is calculated each month [37]. In Greece, the support mechanism establishes that the grid operator or the electricity market operator is obliged to pay the producer for all the electricity fed into to the grid. FITs are based on the average marginal system price, so they can change every year. FITs are paid for 20 years but may be extended by contract between the parties [49]. A great difference from the Italian Conto Energia is the non-constant values of FITs in time. In Spain, the Royal Decree RD 1578/2008 [55] has regulated the economic regime of solar PV plants installed after September 29, 2008. Basically, the two main features of this Royal Decree are: (a) the adoption of a capacity quota system for each type and subtype of PV installation (this gave rise to the creation of the Registry for the pre-allocation of support, in which all the PV installations are inscribed); (b) the classification of PV installations into type 1 (roofs/facades) and the rest (in general, large PV generation plants). Moreover, type 1 plants were divided into 1.1 (installed power less

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or equal than 20 kWp) and 1.2 (installed power bigger than 20 kWp). For each installations type, a quota was assigned. This quota was assigned to the bidders every three months and the feed-in-tariffs for each type of installation was decreased at different times, dependent on when 75% of the cap for each category were reached in the previous round. Even though the system of allotting quotas has remained the same, the Spanish government has reduced the feed-in-tariffs beyond the adjustments of the Real Decreto 1578/2008. The changes have primarily affected type 2 installations feed-in tariffs as follows: by 5% for type 1.1 installations, by 25% for type 1.2 installations, by 45% for type 2 installations and the resulting tariffs levels are: 30,5869 €Cent/kWh for type 1.1 installations, 21,5133 €Cent/kWh for type 1.2 installations and 14,2231 €Cent/kWh for type 2 installations. Finally, in the UK, the electricity generated by PV systems is regulated through a combination of a FIT and a quota system [53].

Italian supporting strategies for PV systems In 2003, the legislative decree D. Lgs. 387/2003 [15] established that PV systems in Italy would be supported by a FIT mechanism. Until then, only capital subsides had been used in buildingmounted PV systems with a rated power up to 20 kW. Indeed, the first incentive policy for PV systems promoted in Italy was the ‘‘10,000 PV Roofs’’ one, launched in 2001 by the Italian Ministry for the Environment with the support of ENEA, the Italian Agency for Energy and New Technologies (DM 16/03/ 2001) [21]. According to this policy, PV systems with rated power from 1 to 20 kW received capital subsides equal to 60–70% of the total purchase, installation, and design costs. The subsidy was granted to PV systems participating in Regional calls after having passed a selection process carried out by technical experts and based on the examination of the preliminary design of the PV system and some other administrative documents. The FIT mechanism in Italy became properly operative only two years after the publication of the D. Lgs. 387/2003 [15], when on 28 July 2005 the ministerial decree DM 28/07/2005 [22] (First Conto Energia) was issued. FITs were paid by GSE (Gestore Servizi Energetici), which is the Italian Institution for the Management of Energetic Systems. Only grid-connected PV systems with rated power from 1 kW to 1 MW could receive the FIT. The duration of the FIT incentive was 20 years with constant remuneration. After 20 years the producer could benefit from the net-metering option or sell the energy to the electricity provider. The incentives were categorized according to the PV plant power: from 1 to 20 kW, from 20 to 50 kW, and from 50 kW to 1 MW. Between 2005 and 2012, the FIT mechanism had five different versions. In 2007, the Decree of the Ministry for Economic Development DM 19/02/2007 [23] announced the beginning of the Second Conto Energia, simplifying the procedure for obtaining the FITs and contributing, in this way, to a high growth of PV plants in Italy. Particularly, the DM 19/02/2007 [23] dealt with the procedure for obtaining the incentive and changed the FITs’ values, distinguishing among:  Field-Installed (FIPV) or Not-Integrated-in-building PV plants (NIPV);  Partially-Integrated-in-building PV plants (PIPV);  Building-Integrated PV plants (BIPV). During the Second Conto Energia incentive period, many researches and investments were carried out to increase the

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energy production of NIPV plants also using dynamic generators [10,11,19]. In 2010, thanks to the great success of the Second Conto Energia, the Italian Government issued the DM 06/08/2010 [24], which announced the beginning of the Third Conto Energia, introducing new rules and new tariffs for PV plants starting from 1 January 2011. The main differences introduced by the new decree dealt with the classification of the PV plants and the values of the related FITs. The new classification was the following:    

In-Building PV plants (IBPV); Innovative-Building-Integrated PV plants (IBIPV); Concentrated PV plants (CPV); Other PV plants (OPV).

Favuzza and Zizzo [35] presented a comparative analysis between the DM 19/02/2007 and DM 06/08/2010 FITs mechanisms, highlighting that the DM 06/08/2010 FITs have mainly penalized the totally integrated PV plants with respect to the unintegrated ones. The ministerial decree DM 05/05/2011 [26] established the Fourth Conto Energia, which entailed a gradual reduction of FIT incentives in order to gradually align the public incentive with the technology costs and at the same time to maintain stability and certainty in the PV market. The Fourth Conto Energia restrained the construction of PV plants with rated power above 1 MW. This was due to the creation of the so-called ‘‘big PV plants register’’. The obligation to catalogue the big PV plants in the plants register indeed did not guarantee that the PV plant owner or investor would receive the FIT; the incentive was assigned respecting a subscription order and until a precise ceiling was reached. The last framework for the FIT mechanism for PV support in Italy is the Decree of the Ministry for Economic Development DM 05/07/2012 [27]. The decree introduced the Fifth Conto Energia with further simplifications in the procedure for obtaining the incentive and changes in the values of FIT incentives, distinguishing among:  Traditional PV systems (TPV);  Innovative Building Integrated PV plants (IBIPV);  Concentrated PV systems (CPV). The new decree came into force on 27 August 2012, except for building-installed PV systems and areas belonging to the Public Administrations, where the new rules were applied from 31 December, 2012. Particularly, the incentive system was composed of two terms:  An FIT for the electricity produced and fed to the grid;  A premium for the electricity produced by the PV system and used by the user for his or her own consumption. The producers could ask for FIT or net-metering for PV installations with rated power up to 200 kWp, while for rated power beyond 200 kWp, the customer could choose whether to sell the electricity produced to the local electricity provider or to use part of it for his or her own consumption. If the producer chose net-metering, he or she could also request a tax detraction equal to 50% of the total PV system cost (purchase plus installation). In this case, he or she was obliged to pay for the PV system exclusively by bank transfer. The Italian legal framework for net-metering is, presently, the AEEG Deliberation 74/2008 [1] amended by the AEEG Deliberation 570/2012/R/efr [2].

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According to DM 05/07/12, both the FIT and the premium were reduced every quarter, taking new values (reported in the decree itself). Moreover, for PV systems whose rated power was above 12 kW, the producer could receive the incentive only if the PV plant was included in a designs list published by GSE on the basis of specific requirements. Fig. 1 shows a flow chart of the five versions of the Italian Conto Energia. Fig. 2 illustrates the evolution of the spread of PV systems that received FITs on the Italian territory. According to TERNA [57], the Italian national transmission grid operator, electricity from PV systems provided 18.8 TWh, that is, the 7.3% of the total electricity during the first seven months of 2013. In Table 1, the FIT values established by the five versions of the Conto Energia are reported. The fourth and fifth versions of Conto Energia established time-decreasing tariffs, depending on the day of connection of the PV plant to the grid. For these two versions of Conto Energia, the highest and lowest values of the FIT incentives are reported in Table 1. Table 2 shows the following data related to the spread of PV plants in Italy during the enactment of the various FIT decrees:  Total number of PV plants in Italy, according to heir rated power;  Total number of PV plants in Italy, according to by their installation place (region);  Type of PV plant installed (building integrated, land plant, etc.);  Type of commercial relationship between the producer and the electricity provider.

Critical analysis of the Italian FITs’ supporting strategies At the beginning of 2013, the Italian PV power was about 17 GW and there were more than 470,000 working PV plants [42]. This success is the result of the Italian incentive policies but is affected by delays and errors in the Italian reward strategy. The ‘‘path’’ of the Italian PV policies is hereafter briefly explained. The first European Directive regarding renewable energies is dated 2001 [20]. Nevertheless, this Directive was implemented n Italy two years later (with the D. Lgs. 387/2003 [15]), and also the first Italian renewable incentive policy is dated 2005 (the First Conto Energia), four years after the 2001/77/EC Directive. The

Fig. 1. Flow chart of the five Italian ‘‘Conto Energia’’ editions.

procedure followed to attain the FIT contained in DM 28/07/2005 was not very attractive and for this reason the First Conto Energia was less successful than had been expected and only a few (5725) plants were installed. The real implementation of the 2001/77/EC Directive was due to the Second Conto Energia from 2007 to 2010. The main novelties introduced by DM 19/02/2007, in comparison with the preceding one, were the following:  FIT and net-metering could be accumulated; that is, all the produced energy was also provided by the incentive if it was used for own-consumption;  The incentive was constant throughout the 20-year period;  The incentive was increased in some particular cases, such as the installation of PV plants as substitutes for asbestos elements or for supplying schools;  No maximum annual cost was fixed for PV plants (only a maximum installed power equal to 1200 MW);  No maximum rated power limit was fixed for each PV plant (it was equal to 1 MW in the preceding policy). The decree remained active until the end of 2010, but its incentives could also be provided to connected PV plants until the end of June 2011. Indeed, in 2010, driven by the PV sector operators, the Italian government issued the so-called ‘‘Salva-Alcoa’’ decree [47], which permitted the PV systems that were already realized but were not connected to the grid on 31 December 2010 to use the tariffs of the Second Conto Energia, even if the Third Conto Energia was already operative. This resulted in great chaos and a rush to realize PV systems before 31 December 2010, with considerable oscillation towards costs of PV modules and large uncertainty for investors. The mismanagement of the Second Conto Energia was basically due to the high complexity of the Italian technical standards regarding the connection to the distribution grid [8] as well as the high complexity of the legislative regulations regarding the authorization for the installation and operation of PV plants. The above mentioned documents were (and sometimes are still) very difficult to be understood and implemented by all the people involved in the planning and management of the issues: designers, installers, administrators and also individuals. This is particularly the case for small investors rather than big companies. The delay of the end of the Second Conto Energia caused problems in the management of the successive policies. The incentives provided by the Second Conto Energia were calibrated on the Italian PV plants’ costs (modules, inverters, etc.) for the year 2007. During the period of enactment of the Second Conto Energia, FIT values should have been reduced in order to take into account the reduction of the market costs from 2007 to 2010, but they were not. In 2009, the cost of PV systems decreased so much that it was possible to imagine a strong reduction of the tariffs established in 2007. Nevertheless, this did not happen until 2011. During the period from February 2007 to June 2011, the costs of PVs decreased more and more but the incentives were still those provided by the Second Conto Energia. This delay of almost two years resulted in a large spread in the construction of PV plants and in an unbearable peak of the cost of the Italian PV FIT mechanism. In order to limit a further increase in the cost of the Conto Energia, the Third Conto Energia fixed FIT values very low with respect to the previous ones. Moreover, this latest policy was operative for a very short time, from January 2011 to May 2011, because it was replaced by the Fourth Conto Energia in June 2011. The Fourth Conto Energia, as well as further reducing the FIT values, restrained the construction of plants with more than

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Fig. 2. Penetration of incentivized PV systems in the Italian territory.

Table 1 FIT values established by the five editions of the ‘‘Conto Energia’’ (CE). Rated power

I CE

II CE

1 kW 6 P 6 3 kW

0.445

0.4 0.44 0.49

NIPV PIPV BIPV

III CE

0.38

NIPV

3 kW 6 P 6 20 kW

0.445

0.42 0.46

PIPV BIPV

0.36

NIPV

0.4 0.44

PIPV BIPV

20 kW < P 6 200 kW

0

0.36

NIPV

200 kW < P 6 1 MW

0

0.4 0.44

PIPV BIPV

0.36

NIPV

1 MW < P 6 5 MW

0

0.4 0.44

PIPV BIPV

0.36

NIPV

P > 5 MW

0

0.4 0.44

PIPV BIPV

IV CE

V CE

0.362 0.402 0.44 0.37 0.339

OPV IBPV IBIPV CPV OPV

0.344–0.221 0.387–0.252 0.427–0.410 0.359–0.345 0.319–0.202

OPV IBPV IBIPV CPV OPV

0.320–0.178 0.334–0.184 0.474–0.293 0.416–0.254 0.296–0.166

OPV IBPV IBIPV CPV OPV

0.377 0.44 0.37 0.321

IBPV IBIPV CPV OPV

0.356–0.227 0.427–0.410 0.359–0.345 0.306–0.189

IBPV IBIPV CPV OPV

0.310–0.174 0.474–0.293 0.416–0.254 0.254–0.154

IBPV IBIPV CPV OPV

0.358 0.4 0.37 0.314

IBPV IBIPV CPV OPV

0.338–0.214 0.388–0.373 0.359–0.345 0.291–0.155

IBPV IBIPV CPV OPV

0.268–0.162 0.450–0.278 0.416–0.254 0.188–0.122

IBPV IBIPV CPV OPV

0.355 0.37 0.32 0.313

IBPV IBIPV CPV OPV

0.325–0.202 0.388–0.373 0.310–0.298 0.277–0.140

IBPV IBIPV CPV OPV

0.202–0.130 0.408–0.256 0.374–0.233 0.158–0.112

IBPV IBIPV CPV OPV

0.351 0.37 0.28 0.297

IBPV IBIPV CPV OPV

0.314–0.164 0.359–0.345 0.272–0.261 0.264–0.133

IBPV IBIPV CPV OPV

0.160–0.118 0.408–0.256 0.308–0.194 0.144–0.102

IBPV IBIPV CPV OPV

0.333 0.37 0.28

IBPV IBIPV CPV

0.299–0.154 0.359–0.345 0.272–0.261

IBPV IBIPV CPV

0.156–0.108 0.408–0.256 0.308–0.194

IBPV IBIPV CPV

NIPV

PIPV and BIPV

On buildings (85%)

On buildings (88%)

On buildings (86%)

Puglia (Southern Italy) = 26,331 kW

Puglia (Southern Italy) = 1,272,388 kW

Puglia (Southern Italy) = 182,656 kW

Puglia (Southern Italy) = 922,622 kW

Lombardia (Northern Italy) = 140,425 kW

Lombardia (Northern Italy) = 701 plants Emilia Romagna (Northern Italy) = 683 plants

Lombardia (Northern Italy) = 30,059 plants Veneto (Northern Italy) = 28,026 plants Emilia Romagna (Northern Italy) = 19,456 plants Piemonte (Northern Italy) = 19,202 plants Lombardia (Northern Italy) = 5772 plants Veneto (Northern Italy) = 5707 plants Emilia Romagna (Northern Italy) = 3270 plants

Lombardia (Northern Italy) = 28,352 plants Veneto (Northern Italy) = 26353plants Emilia Romagna (Northern Italy) = 19,680 plants

Veneto (Northern Italy) = 13,679 plants Lombardia (Northern Italy) = 11,996 plants Emilia Romagna (Northern Italy) = 9216 plants

163,431 (45%, of the total equal to 74,001 kW, is generated by medium-size PV plants, from 20 to 50 kW) 6,807,772 (84% of the total, equal to 5753,124 kW, is generated by PV plants from 20 kW on) 1,573,705 (39% of the total, equal to 615,432 kW, is generated by PV plants from 200 kW to 1 MW) 7,754,187 (42% of the total, equal to 3,269,213 MW, is generated by PV plants from 200 kW to 1 MW) 1,412,646 (30% of the total, equal to 412,124 kW, is generated by small size PV plants from 3 kW to 20 kW) D.M. 05/05/2011: Fifth‘‘Conto Energia

D.M. 05/05/2011: Fourth‘‘Conto Energia

203,734 (53% of total, equal to 108,214, belong to small-sized PV plants from 3 to 20 kW) 39,638 (56% of total, equal to 22,387, belong to small-sized PV plants from 3 to 20 kW) 204,551 (58% of total, equal to 118,971, belong to small-sized PV plants from 3 to 20 kW) 98,137 (62% of total, equal to 61,148, belong to small-sized PV plants from 3 to 20 kW) D.M. 19/02/2007: Second ‘‘Conto Energia

D.M. 06/08/2010: Third ‘‘Conto Energia

5725 (70%, equal to 3964, belong to small-size PV plants, from 1 to 20 kW) DM 28/07/2005 First Conto Energia

PV plant typology Italian Region with maximum PV power installed Italian Regions with maximum number of PV plants Power installed [kW] Number of total PV plants FIT(s) decree

Table 2 Conto Energia data.

The most of the energy produced has been sold (in order to have a direct profit) The most of the energy produced has been sold (in order to have a direct profit) The most of the energy produced has been sold (in order to have a direct profit) The most of the energy produced has been sold (in order to have a direct profit) The most of the energy produced has been sold (in order to have a direct profit)

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Commercial Relationship between producer and Energy Provider

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1 MW PV of rated power and established the register of big PV plants, with some dispensations. However, at the time of publication of the DM 05/05/2011 [26], neither the number nor the cumulated installed power of the plants preserved by the ‘‘Salva-Alcoa’’ decree were known. These data were known only during the fall of 2011, when it was seen that, due to the great number of these plants, the financial resources made available for the Fourth Conto Energia were almost used up only about five months after it began. This caused a reduction in the capital provided by the Fourth Conto Energia, with the result that this capital could be used only for small PV plants. According to its dispositions, the Fourth Conto Energia would have been ‘‘reviewed’’ by the Italian Government when the total incentives costs reached €6 billion. For the above described reasons, the Fifth Conto Energia came early with respect to the expected time, once again perturbing the PV sector through an unexpected reduction of the tariffs. At the end of March 2012, the Italian Economic Development and Environmental Ministers worked hard to implement a new FIT incentive policy. This last version of the FIT mechanism promoted the smallest PV systems (whose rated power was not over 12 kW; besides the request made by the Italian Regions Government was 100 kW) and other particular situations like the installation of PV systems in place of asbestos roofs and on school roofs. The Italian government decided to significantly reduce the tariffs, due to:  The great reduction of the cost of realization of PV systems;  The desire to promote other sectors in which the application of new technologies can give more efficient results (transportation, heat and energy efficiency);  The attainment of the European objective for the production of electricity from RESs for Italy. In conclusion, in Italy it was not set up a system for the control of the PV incentive mechanism. Because of this, from 2006 to 2013 the Italian PV market has been suffering. On July 7, 2013 the Fifth Conto Energia ceased to have effect due to the fact that the yearly cumulative cost of the PV incentive (€6.7 billion) was reached. The total PV power installed was 17.08 GW; another 1.13 GW was briefly connected to the electrical system after this date, giving a total power of 18.21 GW. The end of the Fifth Conto Energia was expected to occur at the end of February 2013, but due to the economic crisis involving the Euro-area [50], it was delayed for five months until 6 July 2013. At the end of January 2014, the DM 31/01/2014 [28] was published regarding the inspections of PV systems in use for checking the subsistence (during the installation life-time) of the conditions for maintaining the right to receive the FIT. The decree establishes the number of PV plants to be checked per year, the requirements for the inspectors nominated by the GSE, the duration of the inspection procedures, and, in particular, the violations that lead to loss of the FIT and the repayment of the amount already obtained.

Economic impact of the Italian FITs’ supporting strategies Since the early 1980s, several Italian companies and organizations have aimed to spread the culture of RESs and developing technologies related to RESs themselves. Despite this, Italy came totally unprepared for the ‘‘boom’’ of renewables that occurred in Europe in the early 2000s.

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As evidence of this, just before the June 2011 referendum (which established the non-use of nuclear energy for power generation), Italy had planned to build several nuclear power plants. Although this unclear energy strategy has not prevented Italy from complying with the European 20/20/20 agreements, it negatively affected the development and the incentives for PV plants. The results achieved in the PV field qualify Italy as a leading country at both European and global level. Anyway, this success led to a significant economic burden on Italian citizens’ energy bills. In fact, the A3 tax burden component of an Italian bill is due to the electricity plants from renewables. It is estimated that the annual cost for an Italian family to support the PV industry is about 7% of the total cost. The data related to the PV plants’ construction and their positions show a low percentage of small and medium-sized PV power plants and a large percentage of big PV power plants (which means fewer big PV power plants but with a considerably higher installed power). Only in the most industrialized Italian regions (Lombardia, Emilia Romagna, and Veneto in Northern Italy) has there been a wide and massive spread of installed PV power. This was basically due to the many small and medium-sized PV plants but also due to incentives for the replacement of asbestos roofs (typical of industrial buildings) with PV ones. On the contrary, in the regions of Southern Italy, which are sunnier and less industrialized than the Northern ones, some foreign companies have engaged in much speculation, especially in the last months of 2010 (the last few months of the second FIT incentive policy). In fact, Italian politicians have given little attention to the PV market and have not duly considered the significant reduction of the PV modules’ costs (which, in a few months, have passed from 65% to 35% of the total cost of the PV plant) and have not consequently decreased the incentive tariffs, thus facilitating the speculation (http://www.enea.it). At that time, investors in and outside Europe built the biggest PV plants in Sicily, Puglia, and Campania (Southern Italy). These plants are grid connected and will enjoy, for the next 14–15 years, disproportionate incentives. These incentives no longer reflect the aim of the Legislative Decree No. 387 (29 December 2003), which was the ‘‘fair return of the investment and operating costs’’ for the ‘‘promotion of electricity produced from renewable energy sources in the internal electricity market’’. Moreover, these incentives place a burden on the Italian citizens’ bills and guarantee profits mainly for foreign investors. The confused Italian energy policy is responsible for the collapse of the PV market in Italy since July 2013 (when the incentives cessed). In fact, although the Italian State has funded institutions and companies since the early 1980s with the aim of spreading the culture of renewable energies, Italy has not been able to aggressively penetrate the PV market. For this reason, Italy has not ensured, even at the end of the incentives period, an adequate employment of the economic efforts supported by all the citizens. On average for a typical household or something similar the rate of the A3 bill ‘‘Promotion of energy production from renewable and assimilated sources’’ amounts to the 18% of the total bill (about €90 per year). The incentives paid annually reached €10 billion in 2012 and €12 billion at the end of 2013. The great difficulty in strongly penetrating the PV market is nowadays testified by the low number of companies producing solar cells and cables. Once the incentives period ended, the number of PV plants installation decreased and the PV field employees decreased as well.

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Finally, taking into account the well-known matters related to fossil resources and pollution, Italy has rightly made massive use of renewable energies, but this has been done in an inappropriate way. In fact, it has always been the ordinary Italian citizen (who is the final consumer of the electricity) who has paid for the cost of PV plant construction on his or her bill. In order to remedy the above described errors, on 24 June 2014, the Italian Government issued Legislative Decree No. 91, known as ‘‘Decreto spalma incentivi per le rinnovabili’’ (Spread Incentives Decree for Renewables). This decree introduced some regulations that have retroactive effects on incentives for PV plants. According to this decree, from 1 January 2015 onward, PV plants with a power higher than 200 kW will suffer a reduction in incentives. Incentives, in fact, will be rescheduled over a period of 24 years instead of 20. For instance, an eight-year-old PV plant will receive incentives for the next 16 years (instead of the 12 years remaining in the previous 20-year plan). This will entail a 25% reduction of incentives, which means that the plant will get an incentive equal to 75% of that initially agreed. The reductions issued by the decree are summarized in Annex II of the decree. This decree remedied some past mistakes. However, because it has a retroactive effect, it neglects the agreement made with the producers and does not provide a new motivation for the spread of the PV field. This field, considering the current costs of PV plants, does not need the support of new incentives in Italy. Today, individuals or organizations in Italy who want to install a PV system can make use of a tax deduction. This deduction is equal to 50% of the building cost in 2014 and 40% in 2015, but has a maximum value equal to €96,000. The deduction can be made in 10 yearly repayments of the same amount (so for example, for a PV plant whose cost is equal to €40,000, €20,000 will be recovered in 10 years, with a yearly repayment equal to €2000). In addition, PV systems benefit from the application of VAT at 10% instead of 22%. This deduction, given the current costs of PV plants in the Southern Italian regions, determines a Pay-Back Time (PBT) of about 9–10 years. The photovoltaic field could receive a big boost from careful national and regional legislation in the building field. Indeed, the obligation to build zero net energy buildings or buildings that are as close as possible to this target, during building renovations, could be the motivation for the relaunch of the PV field, which involves the architectural integration in buildings. Another concrete way for the PV market to be relaunched in Italy may be through the development of inverters integrated with storage systems. In this view, Italian legislation should encourage the adoption of such systems, allowing the user to become a ‘‘smart user’’ with resulting economic benefits. Finally, a PV system equipped with storage inverters could contribute to a local regulation of the frequency and the voltage. This could also lead to the possibility of increasing employment in the Italian energy storage industry [45]. Conclusions By analysing the data reported in previous paragraphs it is possible to summarize as follows:  Italian regions with the highest number of PV plants are in Northern Italy: Lombardia, Veneto, and Emilia Romagna. Nevertheless, the region in which the grid is fed with the highest power by PV plants is Puglia, in Southern Italy, even if it has less than half the number of PV plants installed in Lombardia. This reflects the fact that investors in Puglia have mainly built high-power PV plants;

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350000

Number of PV plants

300000 250000 200000 150000 100000 50000 0 1kW≤P≤3kW

3kW
20kW
200kW
1MW
P>5MW

Power range

100%

90% 80% 70%

60%

82,6

87,9

86,3

companies

50%

individuals

40%

enes

30%

20% 10% 0%

14,6 2,7 2011

8,5 3,6 2012

9,9 3,8 2013

PV plants connected to the grid in the year

Fig. 3. PV plants connected to the grid at 31 July 2013, divided with reference to the rated power.

200000 180000 160000

140000 120000 100000

80000 60000 40000

20000 0

Fig. 4. PV plants distribution per kind of owner: companies, individuals, other entities.

2006

2007

2008

2009

2010

2011

2012

2013

Year

 The construction of PV plants has radically changed the electricity distribution system in Italy. It has passed from a distribution system made up of a few medium/high-power plants to a system made up of many small/medium-power plants. Fig. 3 shows that the most of the PV plants connected to the grid have a rated power not over 20 kW [42];  Most of the total number of PV power plants are owned by companies and the rest are owned by individuals or other entities (schools, etc.), as shown in Fig. 4. Thanks to the FIT decrees, some banks have provided finance to people for the installation and use of PV plants. In returns, banks have received the FIT incentives until the debt is paid by the end-user;  Almost 97% of Italian towns have at least one PV plant; 2008 was the year in which the maximum spread of PV plants occurred, thanks to the Second Conto Energia;  The highest number of PV plants connected to the grid during one year from 2006 to 2013 occurred in 2011 (Fig. 5). However, these plants mostly obtained the FIT fixed by the Second Conto Energia thanks to the ‘‘Salva-Alcoa’’ decree;  There is a kind of commercial relationship between the producer and the electricity provider; most of the energy from PV plants has always been sold to allow a direct profit to be made from PV energy production. Some other considerations can be summarized regarding the FIT experience in Italy;

Fig. 5. Number of PV plants per year connected to the grid from 2006 to 2013, at 31 July 2013.

 As reported in IEA [44], the Italian PV market has been characterized by very high purchase costs. In particular, the prices of PV modules have been very high with respect to the markets of other European countries. Table 3 lists the minimum and maximum construction costs of PV systems in Italy in the period 2005–2013;  The PBP of the investment for the realization of a PV system has been evaluated using the expression derived by Feibel [38], according to which the cash flows are annualized using the Table 3 Minimum and maximum construction costs of PV systems in Italy in the period 2005– 2013. Period

2005–2006

2007–2009

2010–2011

2012–2013

Minimum cost [€/kW] Maximum cost [€/kW]

6500 8000

5500 7000

3000 5000

1800 3000

Table 4 Average Pay-Back Period for PV Systems in Italy in the period 2005–2013. Period

2005–2006

2007–2009

2010–2011

2012–2013

PBP (years)

13  16

11  14

8  10

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following equation: C t ¼ C t =ð1 þ iÞ where Ct is the equivalent present value of the cash flow of the tth year, Ct⁄ is obtained by algebraically adding all the costs Ci and all the profits Pi related to the generic ith year. It has been shown that the PBP of the investment decreased from 2005 to 2013, as reported in Table 4. In the period from 2005 to 2013 the PBP decreased by about 45%, while the FIT values decreased by about 76% for PV plants with rated power higher than 5 MW and by about 56% for BIPV plants with rated power lower than 3 kW, as can be deduced from Table 1. In conclusion, the development of the PV market in Italy has been conditioned by several factors:  The lack of control instruments for monitoring the effects of the FIT mechanism on the PV market, which, with the ‘‘Salva-Alcoa’’ decree, brought great uncertainty to investors in the sector;  A considerable heterogeneity of the local authorization procedures that facilitate the spread of the PV technology in the north of the country, which is characterized by simplified authorization procedures, in spite of the higher productivity of the southern regions. Only in late 2010 with the DM 10/09/2010 [25] did the Italian Government issue national guidelines for the authorization of RES-based generators;  A considerable heterogeneity of the local technical standards for the connection of the RES-based generators to the grid. Only in 2008, with the Standard CEI 0-16, did the AEEG establish national rules for the connection of these generators to the medium-voltage grid and only in 2011 was the same thing done for the connection to the low-voltage grid with the Standard CEI 0-21 [9];  The discontinuous state in the passage from the Second to the Third and the Fourth Conto Energia with regard to the concept of ‘‘date of connection to the grid’’ for PV systems with rated power over 20 kWp. Indeed, in Italy, systems having a rated power over 20 kW PV are considered as industrial generating plants and for this reason they must be registered after their realization and their operation must be authorized by the Financial Technical Office (UTF) after an on-site visit and a technical examination. According to the Second and the Fourth Conto Energia, the date of connection was not dependent on control by the UTF. On the contrary, according to the Third Conto Enegia, the date of connection and therefore the starting date of the incentive was the date of the authorization from the UTF. This situation created great confusion among PV sector operators;  The lack of clarity in many points of the Third and the Fourth Conto Energia, which were explained by GSE months after the date on which the related decrees entered into force.

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