Energy Report - Main report: June 21st 2011

Energy report: Alternative energy By 2020 we expect renewable energy sources to account for just 15% of total energy consumption (up from 12% in 2009) and 25% of total electricity generation (compared with about 21% in 2009). (These figures do not take into account substantial electricity imports generated using renewables.) Italy is bound by the mandatory EU target to increase the share of renewable energy sources in its energy consumption mix to 17% by 2020, but has lagged behind. This may be because of Enel's dominant position in the electricity market. In December 2009 the Energy Authority fined Enel 1m for violating the rules regarding the connection of power plants (especially those using renewables) to the distribution network. The government is overhauling the system of incentives for investment in renewables, partly to lower the cost of electricity to consumers but also because of systemic problems that have led to windfall profits for some generators (especially hydroelectricity producers). Draft legislation finalised in May 2011 proposes gradually to phase out the current system of green certificates and replace it by 2013 with a "feed in tariff" regime, but only for small renewable energy power producers. Operators are concerned that the new system will make it almost impossible for some producers to obtain financing. Hydroelectric Hydroelectric power is by far Italy's largest renewable energy source. After declining to just 10.6% of total electricity generation in 2007, the share of hydroelectric output rose to 13.3% in 2008 and 16.6% in 2009 as a result of a decline in total power generation in 2009 and an increase in hydroelectric output, thanks to a modest increase in capacity and a sharp rise in rainfall. Hydroelectric output will continue to fluctuate owing to variations in annual rainfall. However, we expect hydro generation as a percentage of total electricity production to remain roughly stable during the forecast period because of limited scope to add generating capacity. Wind Despite the considerable potential of wind energy in Italy, growth in investment in this source has slowed after rapid growth in the ten years up to 2008. This probably reflects opposition from local administrations and interest groups to wind farm projects. Nevertheless, we expect installed wind electricity capacity almost to double by 2020, from 3,525 mwe in 2008, and during the same period increase its share in total capacity to about 5.5% from around 3.5%. Solar

Although starting from a very low base, solar electricity capacity has increased more rapidly than any other renewable source in recent years. In 2010 it was an estimated 3.5 gwe, representing a sevenfold rise on 2008. According to the European Photovoltaic Industry Association (EPIA), the proposed reduction of incentives should not deter investment in solar energy projects in Italy. Even without incentives, the EPIA believes that solar would be profitable within five years of coming into operation.

Alternatives consumption and supply

2009a Consumption (% of total) Hydro Geothermal Solar/wind/other Capacity (mwe) Hydro Non-hydro renewables Geothermal Solar Tide/wave/ocean Wind
a

2010a

2011b

2012b

2013b

2014b

2015b

2020b

2.5c 3.0c 0.4c 21,276 6,264 737 1,152 0 4,375

b

2.5 3.1 0.6 21,376 9,402 787 3,490 0 5,125

2.5 3.3 0.6 21,476 10,402 837 4,240 0 5,325

2.5 3.3 0.7 21,576 11,552 837 5,240 0 5,475

2.5 3.3 0.7 21,676 12,702 837 6,240 0 5,625

c

2.5 3.5 0.8 21,776 13,907 892 7,240 0 5,775

2.5 3.6 0.8 21,876 15,112 947 8,240 0 5,925

2.5 3.9 1.1 22,376 20,917 1,002 13,240 0 6,675

Economist Intelligence Unit estimates. Source: Economist Intelligence Unit.

Economist Intelligence Unit forecasts.

Actual.